A Publication of WTVP

"The worst is behind, but recovery isn't imminent." This statement characterizes the overall attitude of the more than 350 interviewees that represent the commercial real estate industry's leading authorities, according to "Emerging Trends in Real Estate 2004." This highly respected survey of the Urban Land Institute (ULI) and Pricewaterhouse-Coopers found 2004 to be widely regarded as a transition period, as markets move toward a weak recovery tempered by a weak job market, geopolitical uncertainty, and U.S. fiscal woes.

"Emerging Trends" noted the jobless recovery is the leading concern. "Real estate markets need corporations to expand to their U.S. workforces to fill empty office space, increase production and distribution benefit warehouses, and step up business travel to lift hotels. Additional wage earners, cashing bigger paychecks, will rent more apartments and spend more in malls. But that just hasn't been happening."

Other issues of concern that affect the industry are rising corporate outsourcing of jobs overseas and fears of terrorism. By some estimates, U.S. companies will send upwards of 3 million service jobs overseas by 2015. At 200 square feet per worker, that's 600 million square feet of office worker space we won't need.

Even technology is negatively affecting building occupancy. These technological advances have improved efficiency and productivity, but at a cost. Telecommunication improvements reduce business travel, and Internet shopping has affected mall sales. Just-in-time distribution systems are cutting the need for warehouse space. For example, most of the Wal-Mart warehouse space today is located in over-the-road semis you see on highways.

Looking towards 2004, a consensus of commercial real estate professionals predicted the following regarding the separate property sectors:

Overall, the commercial real estate market remains a secure investment. It's rarely been subjected to wide swings in value over the years, and 2004 should see gradual improvement and new opportunities. Even better market conditions are predicted for 2005. So this year may present a unique opportunity to take advantage of good values and low rates. IBI