Spring Update. This update is the latest in our series of periodic reports which take a closer look at macro factors impacting commercial real estate (CRE). As in all of our reports, we take a fact-based approached using independent research to produce an unbiased analysis of key developments from a CRE perspective. Fore more, go to http://www.YeskeyRealEstate.com.
A closer look at expectations for 2012. Previous posts discussed how government oversight has emerged as the most impactful issue for CRE, and now we want to take a break from government, and offer some predictions for CRE and its drivers in this pivotal election year. As always, our approach is fact-based, using independent research to develop realistic predictions relevant to the economy, capital markets and alternatives, and commercial real estate.
From Great Recession to Great Debate. The previous blogs discussed how the massive wave of government oversight following the Great Recession fueled a Great Debate about how much intervention is too much. We also suggested dismantling the notion that government is always detrimental, and the need to expand the debate beyond “left vs. right” or “big vs. small” to how the power of government can help the U.S. compete globally.
Ides of March. In keeping with the March 15th date, we want to discuss the need to assassinate the idea that there is nothing positive or beneficial about government oversight of the financial system that supports CRE. The issue of how much government involvement is appropriate has been part of the national conversation since the Great Depression, and the argument has intensified with recent events, especially the Great Recession caused by the 2008-2009 financial crisis, which is still being felt today, despite some modest signs of recovery.
Abundance of issues. What trends do CRE participants really need to pay attention to? In 2012, an obvious answer is hard to come by, as election year hysteria ramps up, and the economy attempts a fragile recovery. We have a surplus of issues demanding our attention, making it hard to prioritize.
Here are just a few examples of key issues currently impacting CRE:
- The economy is recovering very slowly – is this a new normal, or will growth quicken?
- Housing shows signs of improvement, but doldrums continue – is the worst over?
- The recovery of CRE fundamentals paused in 2H11 – will it continue or falter?
- CMBS securitizations hit the wall in 2H11 – will modest growth resume?
- Stock and bond market trends now have a real time impact on CRE capital markets
- Banks remain conservative for all but the highest quality CRE deals – will standards loosen?
- CRE debt maturities remain elevated – will “extend and pretend” delay a full recovery?
- Will REITs outperform alternatives again, or will investors begin to look elsewhere?
- New investment capital has been flowing in, but few deals have closed – more closings ahead?
- Lack of overbuilding helped prevent a more severe downturn – time to start building again?
- U.S. remains the focus for foreign CRE investors – will U.S. investors start to look overseas again?