While it is true that credit markets remain uncertain and that high unemployment is still with us, there are many signs that commercial real estate markets are on the mend.
Unlike a leading indicator such as residential RE, commercial real estate tends to trail mainline economic indicators. CRE tends to grow as a result of economic growth, not vice versa. With cautious optimism reappearing across the broader economy in recent months, what are the signs the CRE cart is following the general economy’s rejuvenated horse?
- An M&A study by Mergermarket found a 23.6% increase in the total value of commercial real estate deals for 2010 compared to 2009. In the United States, the value of M&A activity in the real estate sector increased from $3.8 billion in 2009 to $11.0 billion last year. The number of deals that took place almost doubled, climbing from 20 to 36.
- Occupied US Office space is up for the first time in three years. In its report, property research firm Reis, Inc also found a 0.2% raise in rents, which is the first uptick since 2Q 2008.
- Retail fundamentals appear to be turning around. Vacancies at malls have declined and stayed flat at shopping centers (source: RetailTraffic.com).
- Office-space — the commodity as well as the-underlying property in CMB securities is enjoying a rise in popularity on Wall Street and in primary markets.
- A greater than expected drop in unemployment to 9.4% was released on Friday by the Bureau of Labor Statistics. (credit commercial source)