Despite the stalled labor market, office investors are revving up for a recovery.
By Rich Rosfelder, Associate Editor for CIRE Magazine, [Sept-Oct 2010 Issue]
The road is clear. Lenders have given the green light. Office investors sit in the driver’s seat, poised to push the transaction pedal to the metal. But when they stomp on the accelerator, the car just creeps along. Its economic engine, fueled by job growth, only sputters.
Why can’t the office market speed to recovery?
One problem is the gas: It’s leaden. The private sector added only 71,000 jobs in July, according to the Bureau of Labor Statistics. Though this was an improvement over the 41,000 added in May, it still falls well short of the hiring activity needed to sustain a recovery. July also marked another round of layoffs among temporary census workers, leaving 143,000 unemployed again and offsetting the gains in the private sector.
Despite the correlation, a lack of significant job growth has not completely stalled real estate investment activity. “From institutional investors down to private-capital money, including some new to commercial real estate, financial planners are recommending that their clients diversify their portfolios outside of stocks and mutual funds,” says Jerry A. Williams Jr., CCIM, vice president of Grubb & Ellis Co. in San Antonio, where office sales transaction activity increased 6 percent from second quarter 2009 to second quarter 2010.
In 2Q10, national office sales volume reached $7.42 billion, a 39 percent increase from 2Q09, reports Cassidy Turley. And stabilizing supply and demand drivers indicate that the office sector’s natural healing process has begun in earnest.
“In my opinion, base rent economics have hit bottom,” says Richard Egitto, CCIM, senior managing director with Crimson Services in Littleton, Colo. “And while I do not see rental rates increasing by the end of the year, I am hopeful that the market is stabilizing and that concessions will start to decline as we move into 2011.”
But for office investors ready to shift into high gear, hope may not be enough.
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Carmen has been a practicing commercial real estate broker since 2001. She is a graduate of the Louisiana State University (LSU) E.J. Ourso College of Business and the LSU Flores Masters of Business Administration (MBA) Program with a specialization in Entrepreneurship and Real Estate Finance. Her experience includes past employment as Regional Director of Leasing at Commercial Properties Realty Trust the for-profit arm of the Baton Rouge Area Foundation. Carmen’s affiliations include Louisiana REALTORS®, Greater Baton Rouge Association of REALTORS® Commercial Investment Division, International Council of Shopping Centers, Commercial Real Estate Women, Certified Commercial Investment Member Institute, National Association of REALTORS®, and Urban Land Institute. She is also an active volunteer on the board of directors for the Baton Rouge Gallery, LSU MBA Alumni Association, Junior Achievement of Baton Rouge, and the Junior League of Baton Rouge. Carmen currently serves as the 2010 President of the Louisiana CCIM Chapter.
Saurage Rotenberg Commercial Real Estate is a member of the Baton Rouge Area Chamber of Commerce (BRAC); the West Baton Rouge Chamber of Commerce; the Baton Rouge Growth Coalition; the Baton Rouge Better Business Bureau; the Louisiana Commercial Data Base (LACDB); and the International Council of Shopping Centers (ICSC). Several agents, on an individual basis, are members of the Society of Industrial and Office Realtors® (SIOR), the Certified Commercial Investment Member Institute (CCIM); the National Association of REALTORS® (NAR); and the Greater Baton Rouge Association of REALTORS® Commercial Investment Division (CID).