May 6th, 2010 by Mohammed Cheaib

In spite of the well-known woes of the commercial real estate market today, the watchword among practitioners in this space seems to be “opportunity.” That word came up time and again in a “Women in Commercial Real Estate” meeting I attended on Wednesday.

The event featured a panel of leaders in the commercial space: Gail Lissner, vice president of Appraisal Research Counselors; Victoria Noonan, regional leasing director of commercial development firm Tishman Speyer’s Chicago portfolio; and Goldie B. Wolfe Miller, one of the top commercial real estate brokers in the country. The event was hosted by the Chicago Association of REALTORS®, the Women’s Council of REALTORS®, and the Goldie B. Wolfe Miller Women Leaders in Real Estate Initiative.

Jim Darrow, chair of the Chicago Commercial Forum and a third-generation practitioner, introduced the panelists and offered a brief overview of the commercial market. Here’s an overview some of the major challenges they said commercial brokers, developers, and property managers are facing today:

• Lack of activity: Even people who have only a casual familiarity with commercial real estate realize this is a problem. But few know how bad things truly are. For instance, there were only 71 commercial deals in Chicago during 2009, Darrow said. That’s nearly unheard-of in a major metropolis. “I’ve been on some wild rides over the years, but I haven’t seen anything like what we’re seeing today,” he said.

• Managing expectations: Even though activity and rents are still down in most areas, interest is starting to pick up again. In fact, some markets on the coasts have reported approaching 2007 levels of activity and commercial rents. This means that buyers and tenants attracted by the prospect of deep discounts may not find them after all, or at least not to the extent they might have thought. “Public perceptions are that prices are still at the bottom, though that’s not necessarily the case anymore,” Noonan said.

• Demonstrating viability: In the wake of the commercial crash, tenants and their brokers want to make sure that development and building management companies aren’t fly-by-night outfits. “They want to see our financials. That floors me!” said Wolfe Miller.

Aside from these issues, there are the larger problems for the commercial market, such as tighter credit and unemployment levels, that also plague the residential sector and the general economy.

Even so, things are looking up. Noonan personally reports a large uptick in activity during the past two months, and sees exciting opportunities in areas like green construction and design. Also, Wolfe Miller believes credit will loosen up, perhaps sooner than anyone thinks — even for borrowers who have defaulted on major debts. “People have short memories,” she said.

Most importantly, the commercial market is finding its footing after suffering through some significant blows over the past couple of years, and for the people in that space, it’s a chance to get their business going before the recovery really gets revved up. “1+1 is finally equaling 2,” Darrow said. “All of this adds up to an opportunity to build new business relationships that will pay dividends well into the future.”

 By Brian Summerfield, Online Editor, REALTOR® Magazine

Commercial, industrial, multi-family, office space

May 6th, 2010 by Mohammed Cheaib

Low interest rates are still needed in the U.S. to help the economy overcome difficulties in the real estate market, Eric Rosengren, president of the Federal Reserve Bank of Boston, said Wednesday.

The Federal Reserve has been holding rates at or near zero since December 2008 and promised last month to continue to do so for an “extended period.”

“Serious fiscal problems loom for state and local governments, the U.S. government, and governments around the world, particularly those that have expended large sums of money to recover from this financial crisis and recession,” Rosengren said.

Source: Associated Press, Jeannine Aversa (05/05/2010)

May 6th, 2010 by Mohammed Cheaib

Did banks prey on unwitting consumers or did borrowers go into foreclosure because they stretched further than they should have?

Researchers at the University of Arkansas found that most households in foreclosure were relatively affluent and highly educated people with few or no children, living in geographical areas that experienced extremely rapid real estate appreciation.

The researchers divided U.S. households into 21 life-stage groups, using data from a variety of sources. Then they identified which groups experienced the most foreclosures. The group with the highest foreclosure percentage was one they dubbed “Cash & Careers,” affluent adults born between the mid-1960s and the early 1970s.

Members of this group had high household incomes, high education levels, high home values, and none to only a few children. Also, members of this group were classified as aggressive investors, most of whom lived in areas – California, Nevada, Arizona, and Florida – with rapid real estate appreciation.

“The policy implication from our results is that strong consumer protection laws, though necessary to prevent Wall Street banks from offering high-risk loans to the most vulnerable – will not be sufficient to prevent another financial crisis like the one the U.S. economy experienced in 2007 and 2008,” says Tim Yeager, associate professor of economics and lead author of the study.

Source: University of Arkansas (05/06/2010)