While investment in commercial real estate has decreased to levels not seen in a few years, fundamentals (vacancy, rent growth, absorption) have remained relatively stable. There has not been any great increases in vacancy rates nor have many markets experienced negative rent growth. Under normal circumstances, full or near-to full occupancy coupled with positive rent growth would be sufficient incentive for investors. So where is the disconnect?
Many analysts have assumed that capital does not exist and that banks or other sources of equity have put a halt to lending for commercial real estate. This is not the case.The decline in investment activity has more to do with a lack of confidence by investors and lenders who are leery about current conditions and are taking a “wait and see” attitude. More than anything else, the decline in confidence levels is due to investor concerns about the current and future state of the economy.
The 2008 NAR forecast for four major commercial sectors includes analysis of quarterly data for various tracked metro areas. The sectors include office, industrial, retail and multifamily markets. The data was provided by Torto Wheaton Research and Real Capital Analytics. To read the full report click here. nar-commercial-outlook-2008.pdf