According to the US real estate industry, the commercial real estate market is on the path to recovery. A modest rise in rent has been forecast for the national market in 2011. In 2012, the job market is expected to improve and the real estate market will pick up pace.
Currently, the US commercial real estate sector is witnessing stabilization, though in most markets the rent will continue to remain soft, with the exception of multi-family rentals.
While many areas of the nation are still struggling with depressed real estate sales, others are experiencing rather dramatic sales levels. For instance, for those in the Midwest, farmland is the hottest seller, outpacing many real estate areas that have traditionally been “hotter.” While experts might be somewhat nervous about using the word “boom” to describe what is happening here, it might just play out that way. What’s going on?
While much has been made of the effect the recession had on the residential housing market, it also had an enormous effect on commercial real estate around the nation. This was marked by the incredible number of defaults on commercial mortgages across all sectors. However, things might be improving. Signs of recovery come from the reduced rate of mortgage defaults in the US.
The present market optimism has largely been fueled by the assumption that the real estate market has touched the bottom and the economy is on a growth trajectory. More importantly, market experts argue that the major reason has been the current ability to lock in very low long-term interest rates. Profit taking by bond investors on the Federal Reserve’s recent announcement to purchase US treasuries, on the back of growing economic outlook, has caused a hike in interest rates in the fourth quarter. In spite of the recent jump in the 10-year treasury yield by nearly 80 basis points, it has remained lower than December 2007.
According to rankings released over the weekend by the Mortgage Banking Association, based on volume levels Wells Fargo came in first in the nation for commercial real estate servicing. They also took the first position as multifamily servicer by volume.
Many experts agree that the commercial side of real estate has shown a steady improvement in recent months. But there are some areas of the industry that seem to be fairing better than others.
A senior official with the Federal Reserve announced earlier this month that even though the commercial real estate (CRE) industry has shown some improvements in the U.S., it “is still distressed and the strength and pace of improvements remains uneven.”
Despite gloom and doom forecasts, commercial properties in the U.S. not only started to rebound, but they also experienced the second largest gain in a single year.
With President Obama’s healthcare bill coming closer to reality, investors are making the move back into specific areas of the commercial side of real estate. As baby-boomers retire, or near retirement, at record numbers, this is a golden opportunity for commercial investors to wisely plan for the future.
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