Wednesday, November 16, 2011

Commercial real estate faces a "long grind"

Those interested in the commercial real estate market will be best served if they have a healthy dose of patience, according to national and local experts who gathered in the ballroom at the Ritz-Carlton uptown Wednesday morning.

Charlotteans also need to accept that the local economy has been hit harder than some may like to admit, one economist said.

“I think we’re still delusional in (thinking) that Charlotte’s Charlotte and we didn’t get hit hard,” said UNC Charlotte economist John Connaughton, who was part of a panel that spoke about local real estate trends. “Well, we got hit hard. And it’s not getting better anytime soon.”

Lackluster job creation and a reluctance among businesses and consumers to spend money is hindering a recovery, meaning commercial real estate faces “a long grind” next year, both nationally and locally, according to the latest forecast by the Urban Land Institute.

Nationally, the market has improved from last year, said Stephen Blank, a senior resident fellow with the institute, who came to Charlotte to speak about the forecast. But Blank attributed to the improvement more to overall market conditions stabilizing versus healthily growing.

Cities poised to fare best next year include large metropolitan areas near major ports. Cities that have large energy and technology hubs are also attracting investors’ attention, according to the institute’s report, Emerging Trends in Real Estate 2012.

Job creation is the No. 1 driver in commercial real estate. As jobs are created, companies need more office space for employees. Workers and their families spend money, boosting demand for retail and manufacturing space. Warehouses are then needed to store goods.

Between December 2007 and February 2009, the nation lost 8.7 million jobs, according to Connaughton. North Carolina lost 325,000 jobs and Charlotte lost about 80,000 jobs.

The country has since created roughly two million jobs, or a quarter of the positions lost. The state and Charlotte, however, have created proportionately fewer positions. The jobs being created are also largely in the professional and business services and health and education sectors, while the jobs that were lost were largely in manufacturing and construction. This “mismatch” hurts economic growth, Connaughton said.

Another panelist, Landon Wyatt, a partner with Childress Klein Properties, said the Carolinas have seen an increase in investor interest in industrial properties. While the market remains spotty at best, “capital is flowing here,” Wyatt said, adding that in the last 45 days, there have been five deals done involving industrial properties.


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