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Commercial real estate is out of the Great recession

Commercial Real Estate Outgunning Economy

Overall, commercial real estate has come out of the financial crisis and Great Recession in better shape than the last big CRE downturn in the early 1990s and in far better shape than appeared likely during the crisis.

Some analysts famously called commercial real estate “the next shoe to drop” during the financial crisis, meaning that poor leasing market fundamentals and soured loans had the potential to capsize the industry and destabilize financial markets all over again on the heels of the residential mortgage crisis. Now, however, the prognosis for the industry is surprisingly upbeat considering the subpar recovery. The latest data points are in the industrial and investment markets.

·         The industrial vacancy rate ended the first quarter at 9.4 percent, down from 9.6 percent in the fourth quarter and 10.3 percent in the first quarter of 2011. First quarter absorption totaled a strong 25 million square feet, on par with recent quarters. The average asking rental rate of $5.41 per square foot per year, triple net, rose at an annualized rate of 2.0 percent from the fourth quarter. Space under construction increased slightly to end the quarter at 23.5 million square feet, still near the cyclical low. The industrial market has emerged as one of the healthiest property types thanks to the strong manufacturing sector, robust freight shipments and growing exports.
·         First quarter investment activity measured by dollar volume increased 40 percent from the first quarter of last year according to Real Capital Analytics. The performance was fueled by an 89 percent gain in retail property sales owing to several large mall transactions. Cap rates ticked down by 10 basis points during the quarter for office, retail and hotel sales, to 7.3, 7.3 and 7.6 percent, respectively. Industrial and apartment cap rates were unchanged at 7.8 and 6.3 percent.

So according to this Good New Friday Report (week 16 2012) från Grubb Ellis gives and overall review that commercial real estate has come out of the financial crisis and Great Recession in better shape than the last big CRE downturn in the early 1990s and in far better shape than appeared likely during the crisis. Hear-Hear!

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