A new report by Real Estate Research Corp., Deloitte, and the National Association of REALTORS® finds that good things do not always come to those who wait – especially when you’re a commercial real estate investor. Instead, commercial property investors must learn to adjust to the “new normal” and forge strategies based on the economy as-is.
According to the findings in Expectations & Market Realities in Real Estate 2013 – Turn the Page, commercial real estate investors have been frustrated with the tepid economic recovery and uneven investment returns. The impacts of the Great Recession, along with changing demographic trends and evolving consumer habits, have created a new environment. Even with economic recovery, we are not likely to return to the conditions of yesteryear.
The report finds that the economy is expected to improve modestly in 2013, but remain influenced by the Federal budget deficit, tax increases, and government spending cuts. Business expansion is expected to remain conservative as a result, curtailing commercial property demand throughout much of the country.
Commercial property investors must realize that this economic environment will exist for the foreseeable future. New strategies are required to maximize commercial real estate investment performance in a slow-growth economy.
The president of Real Estate Research Corp, Kenneth Riggs Jr., says, “It is time to stop waiting for the economy and the investment environment to get better. This is it — this is the new normal — and we need to turn the page on the past, and make the adjustments needed to be successful for the balance of this decade.”
However, Riggs Jr. adds that while investors are facing challenges, commercial real estate remains an attractive investment. Capital remains available for commercial property investments, but the discipline for capital has been climbing upward and is more selective. At the same time, slow, fundamental increases are expected in office, industrial, retail, apartment, and hotel property sectors.
The report expects commercial real estate recovery to continue throughout 2013. It points to the 5 million net new jobs that have been created in the last 3 years as an indicator of slowly-growing commerical demand.
In the Boston Metro Area, we can expect our commercial real estate market to fare better than the national average. Our employment strength and economic diversity gives us reason for optimism; yet we are not immune from the national economy and government fiscal policies.
The core findings of the report apply to the Boston Metro Area as well: commercial investors cannot wait for yesterday to return. Adjusting to the current economic realities and moving forward is the recipe for success, whether you are an investor or a business owner!
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