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Commercial Real Estate Market Expected to Stabilize by Third Quarter
With a recession pending or present, the commercial real estate market will face some challenges in pricing and leasing in 2008. However long-term real estate investors are forecasted to continue investing in the market and may discover opportunities in other's missteps, according to a new market analysis.
The U.S. economic slowdown is anticipated to persist through the first quarter and into the second quarter of 2008 with a recovery starting in the second half of the year, says Ray Torto's, CB Richard Ellis chief economist, analysis. The forecast assumes that the recent stimulus measures will work and the capital markets will recover.
The economic slowdown is expected to reduce demand for new space in the leasing market and keep economic rent flat. Economic rent is a measurement equivalent to the change in gross income for occupied space. The forecasted change for the office market in 2008 in economic rent is -0.2 percent.
In 2006, economic rent rose 9.8 percent in the office market, and 9.9 percent in 2007. During the 2001 recession, the economic rent change was -9.6 percent.
While national forecasts call for a rise in vacancy rates in 2008 and a small average rise in rents, there are markets that are expected to fare well in 2008 compared with the nation, per the analysis. For example, economic rent in the office market is forecasted to rise by 8.1 percent in Charlotte, 6.7 percent in Indianapolis and 7 percent in Dallas.