The Motley Fool reports that there are strong signs that the CRE market may have finally hit bottom. Deal volume is increasing as investors, and pools of investor funds, are looking to put idle cash to work in something that yield better than investing in treasuries. Even though banks are still holding significant amounts of CRE on their books, and much more is still hanging out there in non-performing loans, Fool sources indicate that equilibrium may have been achieved.

For our company, In Florida, our deal count is up 95% through YTD July (almost double that of 2009) and gross sales value volume is up 138% – so more deals are closing but they are smaller deals than last year. All of our producers have good looking sales and leasing pipelines, so we are optimistic that our end of Q3 numbers will be strong.

Several interesting points to note. Leasing has been a large part of commercial real estate activity this year. (leasing doesn’t rely as heavily on the lending environment)

On the leasing side of the business, this was the first in 10 quarters in the U.S. office market where we saw a negative net absorption rate (that’s a net decrease of square footage on the market). It indicates that the rental market is at least reaching equilibrium, a solid indication for rents. We are seeing companies making strategic moves to take advantage of low rents to consolidate space, upgrade their digs, or lock in long-term rents. Additionally, there’s an expectation that when rents do stabilize, and eventually tick back up, there will be a lot of tenants that were sitting on the fence who will be clamoring to lock in reduced rents.

On the sales side we are seeing institutions and local buyers picking up “core” properties, and in many cases paying relatively low-cap rates (i.e., they’re generating low returns). These “core” deals are usually fully leased buildings in prime locations, which of course makes it a little easier to get loans.

Additionally, it seems that troubled bank assets are still slow to come to market. This is probably the result of the “lend and extend” or “delay and pray” strategy that many banks have been using to avoid foreclosure.

What’s kind of crazy is that this strategy of kicking the can down the road a couple of years might actually be working — at least in the short term. Still, many regional banks are still in trouble, and more than 100 have already gone bust this year, but there seems to be enough interest from institutional money to prop up prices in key markets.

More to come in upcoming blog posts….I anticipate the activity to pick up locally thru the remainder of the year. Summer is nearly over, so cooler weather and Football season brings more outsiders to town, and has historically helped the real estate market.

Boy, would that be great if we could have some Wins at Doak Campbell along with some more closings!

Remember- Call or Email  if you need help buying, selling or leasing. We are negotiating lease renewals all the time for clients, so even if you are not at the end of your lease, we can help you save money! We have many different marketing systems for all commercial property types, including Accelerated Marketing and Broker Controlled Online Auctions (which allow us to conduct auctions with a “Ebay” style bidding format-without all the high fees and upfront marketing costs that are normally associated with traditional Auctions) and more.  We are focused on Creative Solutions that work! Call us!

-Carlton Dean, CCIM

Email: cdean@svn.com

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