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In last week’s Quick Poll, 58% of respondents say they’re starting to feel the fallout, while 25% indicate their sectors are staying strong and 17% think residential is dragging down commercial. Pat Duffy, president of Colliers Arnold in Clearwater, has been watching the effects on all commercial sectors and offers these observations:

“The obvious impacts are on everybody tangentially connected to residential real estate. In the office sector, it may range from mortgage brokerage to interior design. It’s not just homebuilders that are getting whacked; it’s anybody in that food chain.

“Mortgage firms that were occupying 30,000 sf either don’t exist or they need only 5,000 sf. They dumped a bunch of office space on the market. Statistically it’s probably 1% or 2% overall, but of the vacancy it might be 20%.

“On the industrial side, bathtub manufacturers, window and door distributors, the guys that were building the walls around the subdivisions—there’s a trickle down and they’re the ones using that space. If you geared up for delivering 3,000 to 4,000 units per year, and suddenly you’re down to 500, you don’t need that big a facility anymore.

“On the retail side, if residential growth slows, green-field prospecting by developers and retailers drops to almost zero.

“Residential by itself is not going to take commercial down, but the effect on capital markets could. The subprime problem spilling over onto commercial paper and shutting down lending is a back-door attack and much more scary. If liquidity dries up, or the borrower has to provide a lot more equity, that will reduce the value of commercial real estate. How much depends on how tight it gets and how long it lasts.

“As long as we have net population growth, we will need commercial space to support the growth of jobs and everything else, and this is going to be a short-lived thing. I’m not overly concerned about it.”

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