Williamsburg, Virginia – At the inaugural “Reinventing Real Estate” conference at the College of William and Mary last week, panelists discussed, among other things, the signs that they believe indicate that the commercial real estate market is already improving. While it may not appear on the surface like things are actually getting better, the panel argued that “quality” commercial real estate is actually well on the way to recovery, with some experts citing 30 percent gains in value just in the past year. Quality commercial real estate generally is newer construction, has plenty of tenants and is currently leasing effectively. At this time, it tends not to be exclusively retail space, but often may be mixed use.
Within this somewhat specialized commercial market, things are, in fact, returning to “normal,” and the panel believes that there are several indicators that bode well for the commercial real estate arena at large as well. For starters, there is a greater access to credit, explained Carlos Evans, an executive VP for Wells Fargo National Commercial Banking. While he reminded investors that the securitization market is going to be permanently altered now that banks have to “hold a slice of everything that is sold,” he believes that this will actually increase investor and lender confidence in the quality of the loans that they make. Evans also cited improvements in capital markets as an indicator of improvements to come.
Kenneth Himmel, president and CEO of Related Urban, the country’s leading developer of large-scale and mixed-use properties, agreed with Evans, saying that “There is no question that we will come back. We [American investors] are way too resourceful.” However, Himmel believes that the lower-quality facets of the commercial market may not fully recover their value, largely because there was “way too much marginal work in the [commercial construction] industry” and some of the properties built simply are not conducive to productive, profitable business. He hypothesized that the market correction forced a number of less-than-equipped real estate investors and builders out of the market, and believes that ultimately this will benefit the market because “we need to insure that only the best and the brightest are working in real estate” in order to create a commercial market environment that will prosper.
