Buyers and sellers need to come to terms on the new price reality, for the commercial real estate market around the country to recover.
“The quicker we get there, the better off we are all going to be. We’ve got to create an environment where business people have confidence in the future,” according to Mark Dotzour, chief economist and director of research for the Real Estate Center at Texas A&M; University
On Thursday at the South Florida chapter meeting of NAIOP chapter, the commercial real estate development association, Dotzour gave his economic outlook.
“There’s a lot of demand out there. There’s a lot of people that want to buy real estate. They just won’t because they’re convinced it’s not priced properly,” Dotzour added.
The banks not wanting to write down the value of the assets on their books and continue to play the game of “extend and pretend” is what is holding this up.
Rather than accept the new reduced value of the real estate, that’s when a bank extends the loan coming due.
Dotzour stated that compared to 2007 values, current prices for commercial real estate have decreased between 35% and 50%.
In 2010, improvement in the real estate market is set to start with a stronger recovery by 2011, at which point three should be an increase in absorption of vacant space, rents are to start to rise, as well as property values, Dotzour forecasts.