2009 q3 commercial real estate market survey

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Commercial Real Estate

QUARTERLY MARKET SURVEY

October 2009

NATIONAL ASSOCIATION OF REALTORS®

The Voice for Real Estate ®

NATIONAL ASSOCIATION OF REALTORS

ECONOMIC RESEARCH



OCTOBER 2009



Download this report from:

http://www.realtor.org/research/research/cre_market_survey

Commercial Real EstateQUARTERLY MARKET SURVEY

Copyright © 2009 NATIONAL ASSOCIATION OF REALTORS®. Reproduction, reprintingor retransmission in any form is prohibited without written permission. For questionsregarding this matter please e-mail [email protected].

THE NATIONAL ASSOCIATION OF REALTORS®, “The Voice for Real Estate,” is America’s largest trade association, representing 1.2 million members involved in all

aspects of the residential and commercial real estate industries..

Although the information presented in this survey has been obtained from reliablesources, NAR does not guarantee its accuracy, and such information may be incomplete.This report is for information purposes only.

The REALTORS® Commercial Real Estate Market Survey measures quarterly activity inthe commercial real estate markets. The survey collects data from commercial Realtors®.The survey is designed to provide member Realtors® with an overview of their markets’

performance, sales and rental transactions, along with current economic challenges andfuture expectations. The questions are designed to capture the effects of the existingeconomic conditions on the commercial real estate business. Each quarter, participantsrespond to questions regarding the current demand for commercial properties, price, cap

rates, rental concessions and other economic factors.



OCTOBER 2009




Q3 2009 Survey Highlights

• Sales volume declined 13 percent in the third quarter compared with a year ago.

• Sales prices declined 22 percent in the third quarter on a year -over-year basis.• Cap rates rose on average 39 basis points from the same period a year ago.

• Average vacancy rates increased 7 percent from the second quarter of the year.

• Rental rates were down 13 percent compared with the previous quarter.

• Concession levels moved up 14 percent on a quarterly basis.

• Financing continues to top the list of most pressing current challenges.

4%

3%

10%

15%

21%

47%

Over $10 M

Between $5 M and $10 M

$2 M and $5 M

Between $1 M and $2 M

Between $500K and $1 M

Under $500K

Dollar amount of last transaction – Q3 2009

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

009.Q3

009.Q2

Average Rental Space Demanded During Last Transaction

> 100,000 sq ft

50,000 to 99,999 sq

10,000 to 49,999 sq

< 10,000 sq ft



OCTOBER 2009




EALTORS® Commercial Activity – Q3 2009

ales Volume Compared with Previous Quarter Down 13%

ales Volume Compared with Previous Year Down 35%

ales Prices Compared with Previous Quarter Down 11%

ales Prices Compared with Previous Year Down 22%ap Rates Compared with Previous Year Up 39 bps

pected Availability for the Next 12 Months Up 12%

pected Cap Rate Movement for the Next 12 Months Up 22 bps

ental Volume Compared with Previous Quarter – down 9% Down 9%

ental Rates Compared with Previous Quarter Down 13%

ental Vacancy Rate Compared with Previous Quarter Up 7%

vel of Rent Concessions Compared with Previous Quarter Up 14%

rection of Business Opportunities Compared with Previous Quarter Down 5%

olume of New Construction Compared with Previous Quarter Down 22%



OCTOBER 2009




• “Finding the right product for the buyer I am working with, the tenant I am working with and

meeting an acceptable price for the seller I am working for.”

• “Maturing debt over next few quarters.”

• “No REAL activity. Tire kickers, but few active deals.”

• “No financing, banks require 30% down with SBA guarantee. Buyers are holding on to their

cash.“

• “Buyers and Renters waiting for an even better deal, even if it is unrealistic.”

• “Lack of financing and negativity toward investment. Too much uncertainty in the economy.”

• “What business what market? ”

• “Financing purchases, Banks need to start lending again!”

• “Congress not addressing the issues affecting the commercial real estate industry.”

• “Uncertain Federal direction and results of the national economy.”

• “Banks will not lend money on good loans. Loans that would create jobs. They say they wantno part of commercial lending. I mean what are banks for? “

• “Sadly, the worse is yet to come and recovery will be 5 years away.”

• “Government is pushing jobs overseas with their policies and thus less demand for real

estate.”

• “I think we've only seen the tip of the iceberg as far as commercial property distress.”

• “Indecision and uncertainty are killing deals. Federal government is to blame - no doubt about

it! Print it!”

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2009.Q3 2009.Q2

REALTORS ® Most Pressing Challenges

Other

National Economy

Local Economy

InventoryFinancing



OCTOBER 2009






OCTOBER 2009




The REALTORS® Commercial Real Estate Market Survey asks participants to comment oncurrent challenges and difficulties in their markets. Below are a few of the comments aboutthe 3rd quarter environment and members’ most pressing concerns.

“My major concern is the think-tank in the White House and the dangerous composition of the membership in the House and

Senate. The out of control National Deficit; the lack of domestic manufacturing; the downward evaluation of the US Dollar

show no signs of correction themselves under this Administration.”

“The market is going to be very weak for at least another 12 to 15 months if not longer due to the glut of space and the renta

rates will remain depressed for another 24 months.”

“Wall Street may be doing fine but Main Street does not believe there is a recovery. People's ability to make a profit on MainStreet is still limited .”

“The banks have tied everyone‟s hands. Small retailers are renegotiating leases or closing. Office activity is very low. Large

industrial is in demand (15,000 - 30,000sf) but the inventory is very limited. Investment and land sales are almost non-existe

unless the borrower has a strong cash position and has 30 - 40% down.”

“I believe the market and economy are poised for a double dip recession.”

“The only way to stop the downward trend in commercial real estate is to increase market activity. Banks are essential to

activity. They should fund well constructed commercial real estate transactions.”

“Sellers are getting more realistic with pricing as their motivation increases and they accept the constraints of the market.”

“There is a large oversupply of available properties for rent or sale in a declining marketplace. Changing demographics and

attitudes on the part of consumers is making a permanent change in the future market. The economic balance required

between builders and tenants has vanished. “

“The current CRE market will never recover until lenders start making loans again. Lenders also need to start working with

owners of otherwise good properties going into default because they were over leveraged. When a lender forecloses on a

property when they could have done a loan mod quite easily, everyone loses, including the lender .”

“The banks are killing the sale of income property under 5 million due to their loan requirements .”

“Vacancy rates appear to be leveling! “

“Sellers are selling too high and buyers are thinking that everyone is in distress.”

“It‟s time for the American Business owner to stop waiting for the government to do something that will help them. The vast

majority of business owners will receive no help from the government. Small business owners have always led this country

out of all its past economic problems and this time they will do it again. Business owners are in a state of paralysis and It 's

time to re-think, re-adjust, re-energize and move toward a „new normal‟.”

“Working 5 times as hard to make 50% less income.”



OCTOBER 2009



NATIONAL ASSOCIATION OF REALTORS ®

RESEARCH DIVISION

The Research Division of the NATIONAL ASSOCIATIONof REALTORS® produces the Commercial Real EstateOutlook, a quarterly report forecasting commercial mark

fundamentals. NAR Research also provides theCommercial Leading Indicator, an early measure ofchanges in market activity. Additionally, NAR Researchexamines how changes in the economy affect thecommercial real estate business, and evaluatesregulatory and legislative policy proposals for their impaon REALTORS®, their clients and America’s propertyowners.

If you have questions or comments regarding this report

or any other commercial real estate research, pleasecontact George Ratiu, NAR Economist, [email protected].

• To find out about other products from NAR’s ResearchDivision, visit www.REALTOR.org/research.

NATIONAL ASSOCIATION OF REALTORS ®

Research Division

500 New Jersey Avenue, NWWashington, DC 20001

2009 q3 commercial real estate market survey

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