"I take all this with salt. And posting this for the last two paragraphs. dave"
Commercial Real Estate Reviews Mixed For 2001
Lesley Hensell, Realty Times Columnist
As statistics from the fourth quarter trickle in, they paint an increasingly troubling picture for real estate. An economy that drove vacancies down and prices up through the first half of 2000, slowed to a trickle at the end of the year, leaving predictions for 2001 in limbo.
Although growth is expected to slow, real estate is not experiencing a recession. Experts point out that a significant overbuild has not occurred in office markets, and growth for other sectors slowed during the last year, preventing further over-development in retail, warehouse and lodging.
According to the National Real Estate Index, prices and rents changed little in the United States in the fourth quarter. Rates remained stable in central business district (CBD) office, suburban office, warehouse, retail, Class A apartments and Class B apartments.
Class A apartments was the only sector to show more than a 1 percent price increase during the quarter, while CBD office was the only one to show a rent increase of more than 1 percent. Retail properties turned in the worst performance, with a 0.4 percent decrease in price.
But those results were for the fourth quarter. On the year, every sector showed gains. Price per square foot rose nearly 8 percent for CBD office and more than 9 percent for suburban office. Those sectors also showed the strongest rent performance for the year with both increasing about 11 percent.
While California turned in the strongest numbers for most sectors on the year, the northern part of the state suffered significantly in the last quarter. As dot-com businesses got pummeled on Wall Street, they decreased their demand for office space. This created significant sub-lease space and lower office rents in and around Silicon Valley, the National Real Estate Index reports.
Problems for California are set to grow even worse, as government officials predict rolling blackouts plaguing the summer months.
Despite the financial volatility set off by plummeting technology stock prices, demand for office space remains strong worldwide, says Colliers International.
In most financial centers, demand has pushed vacancies lower and rents higher, yet a slowing U.S. economy makes the future uncertain in 2001.
What's more, Colliers points to higher energy costs in Europe and Asia possibly slowing worldwide economic growth, thus decreasing demand for additional office space.
According to the Organization for Economic Cooperation and Development, the global economy should grow 3.3 percent in 2001, compared to a decade-high 4.3 percent in 2000.
"The real estate market is better prepared for an economic downturn than nearly any other industry," said Ross Moore, vice president and director of research for Colliers. "The hard lessons learned during the last real estate downturn in the early 1990s have been remembered during this upswing in the real estate cycle. Most markets have not become overbuilt and any lessening of demand will not significantly affect major office markets."
Colliers reports near-record low vacancy rates and sharply higher occupancy costs in major U.S. office markets, including New York, Boston, San Francisco and Washington, D.C.
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