Commercial Real Estate Rebound Lags Behind Other Indicators

ANDREW LITTLE TIMES-DISPATCH COLUMNIST
Published: May 11, 2009

It isn't clear if Wynonna Judd was singing about commercial real estate in her hit "Rock Bottom" from a few years back.

But the lyrics "rock bottom is good solid ground" most certainly applies to the industry to day.

The economy seems to be bumping along at what many are calling the bottom, where the lack of more negative news is good news, and a few bright notes give hope there is light at the end of the tunnel.

Consumer confidence rebounded in April to where it was in September, and the pace of job losses has abated somewhat. Positive news has also helped propel the stock market over the last eight weeks, and the S&P 500 is up nicely since its March 9 low.

In the commercial real estate world, however, consumer confidence and the stock market surge don't translate to transactions and development.

In fact, it feels more analogous to going outside after a heavy downpour where the river has flooded and everyone is trying to figure out how high the crest will be.

So while the leading indicators say perhaps it is time to come out of our bunkers, those who watch commercial real estate, as a lagging indicator, are trying to measure how high vacancies and cap rates are going to go.

This downturn has been somewhat indiscriminate, causing job losses across a broad swath of the economy. Employment is still negative in some 90 percent of the nation's top markets.

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