The biggest Commercial Real Estate problem facing the industry, in my opinion, is blatant denial.
Denial by property owners, investor-speculators, a great number of sadly mis-informed and unrealistic commercial agents, governmental officials and many in real estate media positions.
The former "normal market" isn't going to return! The former astronomically high sales and lease prices are not going to be seen for another generation or more.
Massive new financial banking regulations are being prepared as this blog is being published.
Also, in my opinion and based on my 40 years active experience in this field:
1. This is more than just a "recession - depression" caused by massive over-supply and under-demand demand!
2. This is the tip of the beginning of an entirely new way of how all facets of commercial real estate will function.
FACTS: FROM the Third Quarter Market Viewpoint by Colliers Meredith and Grew
In Massachusetts, along Route 495 the vacancy rate is now a whopping 25.5% and rising! ( One out of every 5 building are vacant!)
Along Route 128 the vacancy rate is 18.6% and rising!
Boston office market: Class A Space; 13.% vacancy; Class B, 15.5%
" Although the market appears to be bottoming out, continued contraction is likely over the next six to 12 months or until the labor and financial markers stabilize."
Rental Rates, " On average, rents have declined by approximately 20 to 25% over the past 12 to 18 months."
REAL NUMBERS:
MARKET SUPPLY
Boston 58,187,916 SF of space or 1,335 acres of space under roof)
Cambridge 20,064,264 or 560 acres of space under roof!
SUBURBS ( 128, Mass Pike, 495; 123,271,476 SF
TOTAL 201,523,656 square feet of space.
FACTS: Major real estate nationally known, long established commercial real estate brokerage firms are doing very badly as sales and leasing volumes drop in some instances by as much as 70%
MLS commercial sales and leasing activities are almost nonexistent in the Commonwealth ( Middlesex County: 54 cities and towns; 1,400,000 in population 12 Under agreement deals in 30 days is NOT a healthy, vibrant market.
Today, serious, active viable buyers and investors, of commercial real estate have no patience for the charade of silly, immature and unprofessional denial being maintained on false hopes and unrealistic expectations by many agents and owners.
I know that I'm not wasting my time on them!
Bill McInerney, Commercial Realtor
(617) 816 3933
1 comment:
I agree on the silly notion of the "new normal". When I hear it mentioned I see that the speaker is out of touch. What we have always experienced in the CRE market is is simply a series of cycles which utlimately reach extremes (+ or -). And to say the cycle is just repeating itself as in the last two crashes ignores the unniqueness of each cycle. If they were the same, historians and economists would be among the richest of all CRE investors. I say focus on the present (with perhaps a causal eye on past experience for some secondary guidance), and make decision based on the current factors and trends. Too much is too different in this latest cycle of extremes to decipher what's normal.
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