NEW ORLEANS — While still experiencing challenges, the commercial real-estate market could see signs of steady improvement in the near future, specifically concerning lending, according to two economists addressing the 2010 Realtors Conference & Expo here.
National Association of Realtors (NAR) Chief Economist Lawrence Yun and Hugh Kelly, clinical professor of real estate at New York University Schack Institute of Real Estate, shared their predictions surrounding the commercial market, indicating a slight improvement in commercial lending.
“Banks’ profits have returned to healthy levels,” says Yun. “As a result, it is inevitable they will return to the business they were created for, which is lending. Commercial real estate has experienced a sharp price correction, but there is still a shortage of buyers because of lack of adequate capital resources.”
Kelly says the banks are in the driver’s seat, meaning they can cherry-pick deals and there is no stigma to turning away business. “The capital flow in the commercial real-estate market has been very selective. To achieve full recovery, lending practices must improve.”
The commercial market also depends largely on job creation, Yun adds. According to Yun, the country needs to create much more than 100,000 jobs per month to have a meaningful impact on vacancy rates.
Yun’s 2011 commercial forecast shows steady improvement in the market, with rents stabilizing and net absorption slowly improving. Yun also predicts a moderate GDP expansion of 2% to 2.5% in the next two years and an unemployment rate of 8% in 2012 and 6% in 2015.
The NAR represents 1.1 million members involved in all aspects of the residential and commercial real-estate industries.