Commercial real estate property market is struggling, as a consequence of the foreclosure fiasco which started from the residential property sector. When is the rebound to normalcy and recovery from the gloom possible? This article analyses that subject.
The recently popular Octopus Paul of Soccer World Cup-fame, cannot predict the answer to this question - since there are no just two "Yes" or "No" answers. The direction the U.S. Commercial market is heading can be analyzed, with present indications and a shrewd calculation to arrive at a safe guess. But at the outset we can dare say "the worst is not over yet".
Forums and study groups from National Association of Realtors, the closest relatives of both residential and commercial real estate markets, have analysed the present and future of commercial real estate market prospects thread-bare. After prolonged discussions, the consensus arrived at was - although the commercial real estate has not recovered fully from the setback, caused by the foreclosure fiasco and financial crunch, there are positive signs and trends that could lead to recovery.
What are the good signs which lead to believe that commercial real estate market is heading towards recovery? Well - according to economists, there is momentum for a broader economic expansion and creation of jobs, recently for the few months. But we are midway through this new year and any economic growth and job growth can take at least a year, to be able to fully assess and to come to a conclusion.
Also there are indicators for the good side from commercial real estate markets - availability of distress sale properties for investors and stabilization of price of properties, which were skyrocketing during the boom years.
Judging from the way commercial property lending is easing up, it is hoped by the industry experts that by next year, more commercial property loans will be accessible for investors. In that event, more of commercial property sales can be witnessed by the present sluggish market.
In this context, the two commercial property sectors that are most promising are manufacturing industry and multifamily residential complexes. It is reported in the recent months, the manufacturing activity is picking up, paving way for more employment opportunities. Household formation is rising and so also the multifamily sector.
What are the apprehensions of the industry leaders that would be acting significantly a set back on the progress of commercial real estate market? The prominent anxieties emanate from high vacancy rates of office complexes, and depleted revenue by reduction in rents.
Added to this are unoccupied hotel rooms in the hospitality sector, leading to thinning revenue. This is why we are seeing more commercial property delinquencies from the hot-spot States of tourism - California, Florida and Nevada - leading to more distressed properties from the hotel sector.
The most striking development is - institutional investors in U.S. are selecting as their favorite alternative investment vehicle - the commercial property sector. This is evident from the latest study conducted by J.P. Morgan Asset Management on institutions. The participants of the study were 325 institutions, through their 349 North American delegates.
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