Glenn Mueller
Real Estate Investment Strategist
\ DiviDenD Capital Group
THE U.S. HAS had negative GDP growth through the first
half of 2009. Generally, it takes two quarters of positive GDP
growth for employment growth to recover. Given the poor state
of economic fundamentals, I think we are looking at the end of
2009 or the beginning of 2010 for commercial real estate to show
signs of positive growth, although the turnaround point for the
industry is hard to predict.
This year will be a tough time for REIT earnings. In terms of a
recovery of REIT prices, we need to have some economic recovery and improved investor confidence. I don’t think we’ll
have that in the second half of 2009. The earliest signs will be in
the fourth quarter of this year and then progress into 2010.
REITs also will face the challenge of refinancing their maturing debt in a credit-starved environment. They’ll also need to
recapitalize with more equity and less debt. The ones that do will
survive and probably come out much healthier in the long-term.
patricia barry levy
Stan Ross
Chairman of Lusk Center for Real Estate
\ univerSity of Southern California
I PREDICT THAT the housing sector needs to get to equilibrium before the commercial
sector can recover. We’ll see the housing sector recover in the fourth quarter of 2010 or
the first quarter of 2011, with the initial signs of recovery appearing in the second and
third quarters of 2010.
Right now, the focus is on banking. We need to see a return of the securitized debt
markets before banks will be able to provide liquidity for the commercial real estate marketplace,
which probably won’t happen in the short-term. It will probably take three to five years
for full liquidity to return to the market. We will soon see some important benefit from
federal programs to aid the banking sector, but these will not be sufficient to restore all
liquidity. As a result, real estate companies will continue to have trouble refinancing
maturing debt.
Fundamentals also are weakening throughout the commercial real estate industry, and
the rest of 2009 will provide weak results from operations. I predict we will see more
reorganizations and some bankruptcies.
