RAR Commercial MLS 2009-2010 Economic Forum

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Presentation given at the 2009-2010 Commercial Real Estate Market Forecast and Panel Discussion, Dec. 17, 2009.

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RAR Commercial MLS 2009-2010 Economic Forum

  1. 1. Economic Forum: 2009, 2010 and beyond. Jim Tucker, CCIM • 35 years in commercial real estate brokerage & development • Two-time winner of Virginia “Most Significant Transaction Award” • Over $1 billion in CRE Transactions • SVN “Ambassador of the Year Award 2007” (Pssst….Hey! This guy’s no economist!) • CCIM “Partners Transaction of the Year – 2007” • SVN “Partners Circle” for Annual Transactions $50+ Million
  2. 2. Agenda • “Is it over????” ( 4 Answers) • “Richmond is different…..right???” • “What lies ahead???” • “OK…What can I do to survive?”
  3. 3. Dr. Sam Chandan, CEO CEO - Real Estate Econometrics Wharton School Professor Eminent Fellow RCIS Real Estate Research Institute www.chandan.com • “More Federal Intervention in CRE” • CRE lags jobs recovery for 2 years • More people out of work longer now than in any previous recession • $40B in CRE transactions in 2009; Expect $70B in 2010; smaller deals • Banks “normalize CRE lending to the best-in-class borrowers” by end of 2010 • Experiencing “Headline Risk” in CRE – Buyers’ market for the next 2+ years • Recovery: Apts first; Industrial second; Office third; Retail last
  4. 4. • The Economy is recovering….CRE is not • CRE recovery tied to employment…starts in 2011 • Consumers are spending…fear inflation in 2011-2012 • More Govt Spending to cure unemployment in 2010 • Higher Energy Cost coming our way • Economic activity levels of 2007 not back until 2014 • 2016-2018 for CRE will be very good (growth!!!) Brian Beaulieu, CEO Institute for Trend Research • Retail in “free fall” through 2010 into 2011 Web Conference Wed, December 16, 2009 • Current opportunity in SFR residential…CRE in late 2010 www.ecotrends.org
  5. 5. Wells Fargo Securities – Economics Group Annual Economic Outlook 2010 December 9, 2009 • Deteriorating fundamentals + defaults and foreclosures • Supply: vacancy rates high and going higher and a huge overhang of leased but vacant space • Demand: retail sales subdued and job losses continue. • Bid-Ask gap. Lots of equity “waiting” • Govt intervention will preclude “fire sale” • Extend & Pretend sanctioned by FDIC
  6. 6. • CRE hits bottom in 2010 • Foreclosures & deals financed by TARP, etc. • CRE value losses rival the Great Depression • Worst time ever to sell properties in report’s history • Retail & office properties will take worst hit • Job growth will benefit apartment sector first • Values sink below replacement costs – no development • Washington DC remains “recession-proof”
  7. 7. REIS Observer: Richmond October, 2009 Edition • Moody’s Economy.com – “…14,130 jobs lost in 2008, another 20,200 jobs in 2009 and only gain back 650 in all of 2010. Real recovery arrives in the 2011 to 2013 period. Meanwhile, population will continue to grow at about 1.0% (12,700) for the year and several years thereafter.” • Office- Vacancy at 13.8%: 9.8% for Class A; 16.8% for Class B/C space. 22.3 million S.F. total market • Apartments – Vacancy rate at 8.2% through 2013. 66,400 units in market with limited new supply. • Retail – Vacancy at 11.7% will peak at 14% in late 2011. Rents are falling in 12.8 million S.F. market • Industrial – Vacancy at 9.3%; rent concessions common. No new product for 88.7 million S.F. market. • Investment Sales – Office = “0”; Apartments = “1”; Retail = “2” Lenders reluctant to foreclose.
  8. 8. What lies ahead in 2010? • Increased transaction volumes – “price discovery” • Increased vacancies + declining rents = ???? • Distressed assets dispositions & sale of loans • Increased government intervention in CRE solutions • “Portfolio” dispositions • STNL re-pricing of credits • Emerging transaction platforms • Consolidation of CRE players • More bank closures & consolidations
  9. 9. What can I do??? Relationships ! Interview current & past clients ! Nurture & invest in your clients ! Identify shared values ! Build a “client-model” ! Build a referral network ! Become more visible
  10. 10. What can I do??? Resources ! Be THE Local Market Expert ! Acquire & Use Appropriate Technology Tools ! Trade in your Rolodex for a “CRM” ! Trade & Professional Associations
  11. 11. What can I do??? Results ! Use testimonials & transaction history ! Publish Deal Stories (Blog) ! Choose assignments for “success” ! Partner for success
  12. 12. Thank you!!! NetWorks Commercial Real Estate is looking for brokers who want to participate in the single largest wealth transfer in the history of our economy. Visit us at www.NetWorksCRE.com/careers or email me at Jim@NetWorksCRE.com to learn more.

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