As we move into the New Year, I believe the attitude of the commercial real estate industry, although still wary, is finally becoming optimistic. There is no doubt about it; we still have a ways to go. However, I think during the next two quarters we will see an increase in activity, and decisions on the corporate side will be made quicker. What will it take for us to transition from a small increase to a significant thrust towards a stronger economic recovery?
In order for us to put the recession in the past and move forward, there are two crucial elements that we will need to focus on. First, the unemployment rate needs to be much lower than the current levels. It may seem obvious, but job growth fuels our industry. A lower unemployment rate will increase companies’ needs to reevaluate their real estate assets and pursue new opportunities.
The second indicator is monetary policy—specifically how interest rates fare over the next twelve months. If rates stay on the lower side, for an extended period of time, they could stabilize decision making and transactions in the long run. On the other hand, apprehension of higher interest rates, in the short term, might rush deal completion and slow down business later in the year.
So, where does this leave the corporate tenant? With high unemployment and fear of wavering interest rates, many organizations are wondering when they should begin evaluating their company’s real estate portfolio and pursue new real estate ventures. Well, the answer is simple. There is no time like the present.
The combination of higher vacancy rates, low lease rates and landlords’ trepidation of losing good quality credit occupants is driving negotiations in favor of the tenant. In today's economy, companies should not be afraid to make real estate decisions. Instead, they should take advantage of this cycle and work with a corporate real estate firm, to examine their current lease situation and uncover potential money saving opportunities.
Stay tuned next week for my tips on choosing the best real estate firm for your company!
