Colliers' Ward Caswell

PRETEND IT’S DECEMBER ’08. HOW’D YA’ DO?

Not surprisingly, respondents to last week’s poll weren’t jumping up and down. But neither were they jumping off of ledges. Some 50% of the 254 respondents said they’d Keep Their Heads Above Water, while 37% claim they’d Rally and Profit. A sad 13% said they’d Bleed. Ward Caswell, just settling into his new post as chief research officer at Colliers International in Boston, is counting on the fundamentals to pull us through:

“It’s going to be an interesting year, no doubt about it. We’ve seen a slowdown in many parts of the economy that are affecting sales and leasing markets. A lot of folks have used the word opportunity and some may look at that as being optimistic. I look at it as being quite realistic. Even though many aspects of the capital markets have gone to the trenches, there’s still a lot of capital out there that has very specific real estate goals tagged to it that are looking for acquisitions.

“Of all of the people who have contacted me in this new role, fully half are folks looking for specific types of acquisitions. And what they all seem to be waiting for is a firm grasp of pricing. I’m not sure how much that’s slowing down activity. As I talk to different people, everybody is still very busy, just not as frantically busy as they were in the first half of ‘07. I’ve heard of some deals that sold out and others that got repriced and some that got pulled off the table.

“One of the battles I’m seeing right now is between two different classes of players–traditional or longer-term players and Wall Street. We’re seeing those two different classes both on the leasing side and investment side. The interesting part about it is that while they might be seen as the outsider in the commercial real estate world, Wall Street firms have bought a lot of real estate. Now they’re in the position of being owners trying to get good net operating incomes, and we’ve seen some of them trying to jack up rents beyond the market.

“They’ve been much more aggressive and ambitious in that regard compared to some of the traditional players, and everyone’s wondering what they could get. But economists will tell you that landlords don’t set rents, the market does.

“There is some opportunity coming on and it is frankly overdue in a lot of areas where there hasn’t been a lot of great space to lease. There hasn’t been that bulk level of construction we saw in previous cycles. Certainly there’s a fair amount under way, but we haven’t seen the huge overhang we saw in previous cycles.

“So the underlying fundamentals look pretty good. With Wall Street pushing for higher rents, the others have been watching to see how it’s going to go. I did believe this was what you might call a CNN recession. The core numbers don’t say recession.

“That being said, I’ve been talking with people at different levels of the economy, expecting something that would confirm the thought that this is a CNN recession. What I found was quite different. I found that what the politicians are saying–which I didn’t put much stock in–actually seems to be true. People at the lower rungs of the economy are really feeling it. There are people out of work but not on the unemployment rolls, because the way their jobs have been structured, they’ve been forced into contract work. There are people employed in trades who have gotten wage decreases. And I’ve had the most shocking conversation with some folks who are telling me their families are making choices between car payments and health care. So I’m a little more skeptical about the strength of the economy than I was a couple of weeks ago.

“But this industry is an optimistic group. And it’s that optimism that will actually pull us through it. People are waiting for momentum. They’re waiting for action.”