Commercial Market to Bottom in 09, Struggle in 2010

Summer 2009
Industry News

Report: Commercial Real Estate Market to Hit Bottom This Year, Struggle for Much of 2010

The Urban Land Institute and PricewaterhouseCoopers LLP have released a report indicating that the U.S. commercial real estate market will bottom out this year and then flounder for much of 2010.

According to the report, Emerging Trends in Real Estate 2009, projected losses in commercial real estate will be between 15 and 20 percent from the mid-2007 peak. “Only when property financing gets restructured will pricing re-correct so we can find the floor; and this transition could wipe out companies and people,” says one expert quoted in the report.

“The cyclical real estate markets always come back, and they will this time too, but not anytime soon,” said Tim Conlon, partner and U.S. real estate sector leader for PricewaterhouseCoopers. “Commercial real estate was the last to leave the party, will feel the pain in 2009, and may be the last to recover. In the meantime, smart investors are going to hunker down and manage through these tough times. We expect to see patient, disciplined, long-term investors rewarded, and return to a back-to-basics approach to property management, underwriting and deal structure.”

The report states further that the top markets to watch are Seattle; San Francisco; Washington, D.C.; New York; and Los Angeles. In terms of investment, Emerging Trends indicates, Seattle and San Francisco take the top two rankings, while Las Vegas and Phoenix get “blown out,” and the Florida markets remain in disarray. To read more, visit the Urban Land Institute’s website at www.uli.org. MD