When Will Commercial Leasing Recover?

Again and again, we’ve been asked “When will commercial leasing recover?” Brokers, investors, developers, lenders, and reporters, are all desperately searching for the answer.  While this is a reasonable question, especially given how much of the global economy depends on the success of commercial real estate, the answer is uncertain.

A better question would be “When will the economy truly recover and achieve balance?”  Because commercial real estate is so dependent on economic drivers (purchasing, hiring, growth), the answer to the real question can be found in the speed and depth of the economic recovery.

Job growth directly correlates to demand for office space.  Specifically, experts anticipate increases in demand for commercial office leasing to occur when companies stop laying-off employees and other companies begin hiring again.

Demand for leasing of distribution and warehouse space will occur along with an increase in demand for consumer and business goods.  When businesses and consumers begin to spend on a consistent and growing basis again, the need for distribution and storing of those goods will increase. Correspondingly, demand for distribution space will also grow.

Spending will certainly have a positive impact on retail real estate leasing, as well.  Although, some believe that the retail real estate market in some parts of the country, as a whole, may have excessive over-supply, such that it may not be absorbed for a long time after a recovery takes place.

Consumers will increase spending when their jobs appear to be more stable, when their futures begin to look bright again, and when the economy shows signs of consistency and stability, again.

So, it’s really all about jobs, isn’t it?  A lot must take place in order for companies to begin hiring again.  Important issues like the availability of capital and credit, the interplay of global economies, taxes, healthcare, geopolitical matters, and more, must show light at the end of their respective tunnels before confidence can returns to companies, investors, and consumers.

 “When will commercial leasing recover?”  Simply put, commercial real estate continues to be a lagging indicator of economic conditions.  As such, we expect increased demand for commercial real estate leasing to occur three to nine months, or more, after the overall economy strengthens in earnest.

What do you think?

Copyright Real Estate Strategies Corporation 2009.  All Rights Reserved.

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THIS WORK IS DESIGNED TO PROVIDE PRACTICAL AND USEFUL INFORMATION ON THE SUBJECT MATTER COVERED AND REPRESENTS THE OPINION OF THE AUTHOR. HOWEVER, IT IS PROVIDED WITH THE UNDERSTANDING THAT THE AUTHOR IS NOT ENGAGED IN RENDERING LEGAL, FINANCIAL, ACCOUNTING, OR OTHER PROFESSIONAL ADVICE TO THE READER. IF LEGAL, FINANCIAL, ACCOUNTING, OR OTHER PROFESSIONAL ADVICE IS REQUIRED, THE SERVICES OF A COMPETENT PROFESSIONAL SHOULD BE SOUGHT. THE AUTHOR SPECIFICALLY AND EXPRESSLY DISCLAIMS ANY LIABILITY THAT MAY BE INCURRED AS A RESULT OF THE USE OR APPLICATION OF THE INFORMATION THAT IS CONTAINED IN THIS WORK.

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