At a client meeting last week, a top broker asked me when wewould see "some good news." Come to think of it, I´ve been writingthis blog since November 2007, and it´s been all downhill sincethen. I asked him what he thought---he helps oversee a 1500-plusnationwide network trying to source deals. He said he didn´t know,but except for a few isolated markets-like San Francisco and maybeWashington DC, most places are still bottoming. He added untilplayers are comfortable about a turnaround, the transaction marketswill remain compromised. Well, that´s certainly the conventionaltake and makes sense.
So what does that mean for timing a recovery? Well, it´s still agood bet that commercial markets will stop falling during 2010. Thebig pension fund accounts have taken huge write downs, approaching40%, on their institutional quality portfolios. They may loseanother 5-10% before they´re done, but most of the depreciation isalready out of the way.
Now keep in mind, the commercial real estate markets trailedhousing and the stock market into the tank by a good 18 months totwo years. Housing arguably hit bottom about a year ago andstruggles for any lift. The stock market began a bull run lastspring reversing part of its steep fall. The lag suggestscommercial properties will bottom out during the second half of theyear-higher quality properties before B and C. The bigger 24-hourhour gateway markets will recover more quickly-that´s why San Franand DC appear ahead of the curve. New York will be an earlyconvalescent too.
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