Report says commercial real estate will hit bottom in 2010

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Print this page by Paula C. Squires

For commercial real estate, 2010 will be a grim year of reckoning. A surge of write downs, defaults and workouts will weed out all but the strongest players as the market hits bottom.

Slack demand will bump up vacancies. And developers might as well take a holiday since investors will be more interested in scooping up premium properties at bargain prices than building new ones.

That’s the forecast in one of the industry’s most widely watched surveys. Released today, Emerging Trends in Real Estate 2010 — a joint venture of the nonprofit Urban Land Institute and PricewaterhouseCoopers — doesn’t expect a market rebound until late 2011 or 2012.

The 31st annual report includes 900 interviews, a record number, with a wide array of industry experts. Their verdict for 2010: decidedly negative. They expect property values to decline 40 to 50 percent off peak pricing levels in 2007 in the worst market reversals since the Great Depression.

These declines, though, could present opportunities for investors. “A sense of nervous euphoria grows among liquid investors who can make all-cash purchases,” the report says.

During a webinar today with reporters, Stephen R. Blank, a senior fellow for the Urban Land Institute and one of the report’s principal researchers said, 2010 and 2011 will be an incredible time to buy real estate. “Some good deals will be made and some fortunes.”

In terms of investment, Washington, D.C., was named as the No. 1 market to watch for next year. The metropolitan area is nearly recession proof, the report notes, because of the presence of the federal government. Plus, it s a global, 24-hour, gateway market that tends to recover more quickly.


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