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EAST RUTHERFORD, NJ-While much has been made about the cyclical nature of the commercial real estate industry, the current slowdown does not fit the historical model, at least according to Donald P. Eisen, an executive managing director at Cushman & Wakefield.

“The last two downturns were very much related to the commercial markets getting out of balance. Each time, it took four or five years to work through,” Eisen says, adding that these earlier cycles correlated with business expansions and contractions. This time, however, it is different. “The last business expansion was the result of easy credit,” he says, “and the fallout is a pandemic–it is across every piece of the financial community. It includes every facet of real estate, having started in residential and made its way through office, industrial, retail and multifamily. The failure of our whole financial structure globally makes this the granddaddy.”

According to Eisen, when the industry rebounds, things will have changed. “We are going back to basics and we can expect to see a huge de-leveraging of our society. Moving forward, if you want to buy a piece of property, you will have to use some capital,” he says.

In the early 1990s, there was aggressive construction of spec buildings stemming from tax law changes and optimism in the future. “When the crash came, the RTC dealt with property that failed,” Eisen says. He adds that we may see some kind of similar governmental setup created to deal with the now toxic assets that so many financial institutions hold today–nationally and globally.

The good news is that there are still windows of opportunity. “Many investors and developers stopped buying properties because they could not make sense of the market, and now financing is presenting a major hurdle,” Eisen says. “But anyone on the sidelines with cash will be rewarded wildly. If they are liquid and can make it through, this is a great time for owners, developers, brokers, appraisers and anyone else to be in the business. While not much is happening right this minute, the survivors will enjoy amazing opportunities.”

In the meantime, he says, “we must work to create the best possible business climate. For our government, this downturn presents an outstanding opportunity to take a look at policies and procedures with the goal to make it easier for companies to do business in New Jersey.”

In terms of the state’s tenant base, the financial and insurance industries have been hit hard, and there is also consolidation within the pharmaceutical sector. Still, Eisen points to New Jersey’s recovery from the telecom industry contraction as a reason for optimism. Despite all of the doom and gloom proselytizing, “we need to remember that, in light of staggering unemployment, 90% of Americans will continue to be employed and receive a paycheck,” he says. “Yes, we are in choppy waters now. We know that until the banking system gets more balanced and we have some debt flowing, things will be rough and tumble. But people will do what they need to do. All this tumult will create new real estate opportunities.”

In the year ahead, look for significant shuffling around as people feel for the bottom. “Only the bravest will buy on the way down, and we are still working our way down,” Eisen says, “but I am advising my clients to keep their eyes open while paying close attention to pricing. There exist great opportunities for tenants and investors to acquire real estate that for the last 15 years has just not been available or affordable. This includes well-located, high-value properties.”

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