CRE Report for 07.11.2011 – Office and Retail Recovery

Bob – Walt, what do you have for us today?

Walt – Good morning Bob, at my house last night we had these wet droplets falling from the sky, I think it’s called rain.

I want to briefly discuss the recovery in the retail and office markets.

The retail recovery will continue to be a slow grind; vacancies are going to be in bouncy territory over at least the next year.

Using a baseball analogy, the retail market is about in the 3^rd inning of a 9 inning game and the game appears to be heading for extra innings.

We might a few projects come out of the ground but any new construction will be closely analyzed.

The other point about retail is the significant amount of struggling properties working their way to their loan call which could potentially spell trouble, as those loans coming due will have difficulty in getting refinanced.

Bob, the numbers are staggering for the amount of loans coming due in 2015, 2016 and 2017; even though that is a ways off, it shows the issues retail properties will be dealing with over the next few years.

 Bob – Walt, I know that we haven’t had any good news for the commercial sector since you started talking about this a couple years ago, is there any good news for office properties in today’s market?

Walt – I know it has been a tough market.  As a retired NFL football player I’m praying that my retirement will get a major boost with the new agreement.

The office sector especially in new construction is on hold.

First, there just aren’t enough tenants willing to occupy enough space to trigger construction, second there is very little willingness with lenders to finance any projects, the third reason is the high vacancy rate which in ABQ is over 18%, is just too much risk for developers, and lastly office construction usually coincides with strong Gross Domestic Product or GDP, with a negative 2% GDP in 2009, until GDP improves significantly new office construction will not happen.

Bob – Is there any silver lining in these markets and what are the prospects for commercial real estate investors?

Walt – The saying is, the height of pessimism is the time to invest. There are opportunities in this market, and at Sperry Van Ness we are in this market everyday talking to lenders and property owners that need to dispose of their assets and we work with buyers and investors trying to navigate this difficult environment.

 Bob – How can people contact you to discuss these opportunities?

Walt – Thanks Bob, call Walt Arnold at 256-1255, our website is waltarnold.com. With over 20 years in the commercial real estate business, I know how to help buyers, sellers; landlords and tenants get through this difficult environment.  Thanks for the time today, have a great week.