Office and industrial developers and brokers looking for relief in the commercial real estate market might have to wait until late 2008 or early 2009 at the earliest, an industry expert said.
“There?s a real disconnect between the real estate market and the capital markets,” said Stephen Blank, senior resident fellow of the Washington, D.C.-based Urban Land Institute, a nonprofit land use and development research and education organization.
“There?s just a huge amount of uncertainty and things that have to recover,” Blank said Tuesday morning at a ULI-Baltimore event.
Increasing national unemployment, inflation, slower consumer spending, limited credit availability and the residential market downturn have all affected the commercial real estate market, Blank said. Developers are struggling to secure financing, while buyers are holding off on investing until the economy improves, making times uncertain in the industry.
Indeed, commercial real estate leaders in the Baltimore-Washington area are expecting the worst from the national economy, according to “Trend Watch 2008: The Baltimore-Washington Commercial Real Estate Outlook,” a survey of more than 120 industry professionals from across the region.
“Sixty-nine percent of the respondents think the economy will weaken over the next one to two years,” Anne-Therese Bechamps, a graduate student in the Edward St. John Real Estate Program at Johns Hopkins University and one of the outlook?s authors, said at the ULI-Baltimore event.
“However, 88 percent think the regional economy will do better than the national economy,” Bechamps added. About 50 percent of respondents expected office vacancy rates in the Baltimore region to increase and office absorption to decrease over the next one to two years.
Respondents were split on the flex/industrial side, with 42 percent saying vacancy rates would increase over the next one to two years and 42 percent predicting a decrease in vacancy rates, Bechamps said.
With the health of the commercial real estate market resting on capital flow and the strength of the economy, Blank did his best to encourage the local industry professionals in attendance.
“I thank you for sitting through this and not squirming in your seat too much,” Blank said.
