A Brief First Quarter Review:
According to Wells Fargo Securities, Private-sector employment has increased by 1.9% while hiring among businesses and professional services have increased by a hefty 4.1%! And as you know, job growth is positively correlated with commercial real estate demand. More employees mean a higher demand for office, retail, and industrial space. Office vacancy rate falls for the first time in three years to 17.5% Retail vacancy rate is still high but peaked at 10.9% Industrial vacancy rate falls down to 11.9%
While there are surely signs of improvement in the market, it is important to be aware that the recovery is still uneven. The areas that have seen the most improvement include high-tech centers and major energy markets. Many other areas of the market are still lagging. In addition, there are still billions of dollars worth of maturing commercial real estate loans that still need to be refinanced. This will most likely last for the next five years alongside a sizable equity gap. Thus, Lenders and Developers continue to have a cautious outlook on the current market situation. However, I believe that this caution will have a positive effect on the market. Building construction and development inhibition can actually lead to quicker recovery. As a result, over supplied areas and older properties will be benefitted.
