C-Suite Advisory June 2002

How Long Will The Tenant’s Market Last?

It’s that time in the economic cycle where the lagging nature of the commercial real estate market becomes more visible than the North Star. The economy looks and feels like it has emerged from the recession with expected moderate growth in the first half of 2002, but employment remains a lagging indicator. Companies have been reluctant to hire until they have a few good months of increasing orders under their belts and are confident that their new business can be sustained.

That presents a real timing problem for building owners. Unfortunately demand for commercial real estate, particularly office space, depends on employment growth. The conundrum is that while employment growth is a lagging indictor of economic expansion, it is a leading indicator of real estate leasing activity and net absorption. You could say that real estate is a double lagging indicator of economic expansion.

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