Real Estate

Commercial Real Estate Growth

Can we expert commercial real estate growth in the next few years? More importantly, how long should we wait before we see any form of real estate development? Experts are divided on the issue. Some say the market won’t grow for two years owing to a lack of liquidity. Others believe there will only be slight growth that will blossom after 12 months. Factors responsible for depressed growth include retail bankruptcies, bank closures, unemployment and lots of office space.

The Federal Reserve reported that commercial real estate investment activity weakened further since its last report in March, 2009. Compounding the problem are stringent requirements for commercial real estate loans as a result of worries of worsening loan quality in the sector.

Recently, General Growth Properties, the second largest operator of shopping malls in America, filed for Chapter 11 protection, making it the biggest retail casualty of the recession. Early casualties include Circuit City, Linens ‘N Things and Steve & Barry’s that have all filed for bankruptcy.

Experts believe that many other companies could be affected by this development. Reports say that one of General Growth Properties’ largest unsecured creditors is Bank of New York Mellon although it is listed as a trustee for other creditors.

Analysts expect a curtailed supply of new construction, more focus on cash flow, new incentives for tenants, greater equity required of borrowers and increased government regulation. They predict that many office, retail and condo projects will go back to lenders this year since cash flows have declined and debt that is due cannot be refinanced as long as credit is scarce. So what’s on the horizon? No one can be sure for now. As the saying goes, let’s hope for the best and pray that things don’t get worse.

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