Bach Weighs in on Market Myths and Realities

He so by asking, with a show of hands, who in the audience thought several statements about the market were myth or reality. He based his answers on findings based on his research and PNC Real Estate Finance.

The first question: "Is leasing activity picking up? " A myth, he says.

Even thought brokers say there phones are ringing off the hook--which, he said, is true--the increased activity has yet to statistically translated into increased leasing activity.

Have rental rates hit bottom? "I have to go with the pessimists," Bach said. "On the national level and in Denver, they have not hit bottom yet. They are likely to hit bottom by the middle of 2004. And even when leasing activity picks up, there is going to be a lot of empty space. But landlords may start to become less generous in 2004, as leasing picks up. We may see rental rates level off and some of the most generous concessions will disappear."

Rates likely will rise later this year as the economy improves, he says, although he notes there is a minority opinion among some analysts that rates will stay where they are or will even drop slightly. But Bach says the good news is that even if rates do rise, they likely won't jump by that much, and will still be attractive enough that investors will still be drawn to commercial properties.

The problem is under-demand, not over-supply? Quite a few in the Denver audience raised their hands to agree with this one.

But Bach says it's a myth. "Or at least it is sort of irrelevant," he says. "We have a lot of excess space. And while it's true we built to demand, or a little under demand, a lot of the demand was built on shifting sands. " The recovery will be slow? Just about everyone in Denver agreed this was true, as did Bach. "In general, the recovery will be slow and Denver will lag the national recovery, "Bach says.