At the recent National Association of Realtors Midyear Legislative Meetings & Trade Expo in Washington, D.C., NAR Chief Economist Lawrence Yun identified some positive trends in the commercial market that point to an eventual recovery.
“With the momentum of a broader economic expansion and the recent creation of jobs, the commercial market is showing slight signs of improvement,” said Yun. “There will likely be weaker figures through 2010, but it’s important to keep in mind that commercial real estate almost always lags the economy by a full year.”
Yun said jobs only began increasing a couple of months ago and are still below peak. “We have turned a corner in terms of jobs, but we still have a long way to go.”
The commercial market has seen a few improving trends in recent months, according to Yun. He said the market is experiencing an increase in transactions due to more distressed properties available and prices beginning to stabilize. Yun said within the next year more lending will slowly become accessible to commercial property owners.
Two commercial sectors showing the most promise are manufacturing and multifamily. Manufacturing activity and employment have risen recently and because household formation is also rising, the multifamily sector will likely fare the best during this economy, Yun noted.
During the session, Yun was joined by two leading economic experts, Diane Swonk, Mesirow Financial; and Brendan Reilly, Commercial Mortgage Securities Association. The panelists agreed that an improving economy and job creation continue to be the two main factors when it comes to restoring the commercial real estate market.
“The commercial market may not be where we would like to see it right now, but it is trending up,” said Swonk. “The economy is slowly stabilizing and jobs are steadily rising, but full recovery cannot happen without liquidity. Liquidity is the fuel for the engine in the commercial real estate market.”