Toward the end of the movie version of The Perfect Storm, the ill-fated fishing boat briefly sails through pale sunlight and calm seas before heading abruptly back into hurricane-force winds and mountainous waves. That, fortunately, is not an apt metaphor for commercial real estate’s outlook at midyear. A double-dip recession looms smaller than it did nine months ago. The forecast calls for gradual clearing marked by occasional patches of inclement weather—or, as Cassidy Turley’s Kevin Thorpe puts it, “a slow rise with some painful episodes.”
Compared to the beginning of the second quarter, “It seems like the economy is slowing down and losing momentum,” says Robert Bach, senior vice president and chief economist at Grubb & Ellis. “You hear more people talking about the possibility of a double-dip, but the majority still thinks the economy will muddle through this without another downturn. I’m in that category; I think we can avoid a second recession.”
If one does occur, Chicago-based Bach adds, “it would be shallow, certainly not a repeat of what we had in 2008 and 2009. The drivers of that recession were more severe and there were more unknowns than there are now.”
However, the known factors are enough to pose some substantial challenges for the industry. “The private sector is simply not hiring aggressively enough to lower unemployment,” says Thorpe, chief economist at Cassidy Turley in Washington, DC. This poses the risk of a stalling recovery, he says, adding, “As we move away from a stimulus-based recovery, we expect to see some unimpressive economic data for a while.”
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