The State of the Commercial Real Estate Market?

Where Are We in the Current Cycle?
Jim Glassman, Head Economist

The outlook for the commercial real estate sector looks pretty promising and one of the reasons for that is because commercial real estate was hit pretty hard during the recession and we went through a number of years where there wasn't much activity going on so we're seeing a lot of catch up right now; a lot of pent up demand.

And one of the things, in particular, that's been helping the commercial real estate sector is strong fundamentals.

What's behind those fundamentals? More jobs, better income trends, stronger rent trends. And those are all very favorable for the commercial real estate sector.

How Is the Real Estate Landscape Different Today?
Al Brooks, Head of Commercial Real Estate

I think a lot of people are using the last downturn as their touch-point for what's going on here and in the last downturn we peaked at certain per square foot rents and per square foot values. And we're back to those numbers again; we're back to the height of where we were in the market.

What's different this time around though is we have a consumer who doesn't have as much debt, we also have finally earned. And we are seeing this in almost all markets we serve: wages are moving up and that's a real positive thing for commercial real estate.

How Are Regions and Asset Classes Performing?
Al Brooks, Head of Commercial Real Estate

Our view is we clearly seem to have more room in many markets, but you have to be specific about the markets. You know, we have markets like Texas that are impacted by the price of oil. They're very different from markets like San Francisco or Seattle which are driven off the tech industry or a Los Angeles that is driven off of trade. So, all of them are in different parts of the market and each of the asset classes are in different parts of the market.

So we're in a different position, probably further along in the cycle in multi-family than we are in office or that we are in industrial or retail.