Sunday, November 3, 2013

Commercial Construction is Slow For Now

In most regions of the US Commercial Construction is slow, however there are new schools being built, infrastructure and some LEED Certified strip malls, business buildings and shopping centers. Unfortunately, at the same time there are older shopping centers where the anchor tenants have moved out and the small businesses are left holding the bag to run out their ten-year leases, most will not survive. Many of these are franchised outlets where folks have invested a half-a-million dollars or more in their businesses.

Tenant Improvement is also slow right now as few businesses are starting right now due to economic conditions. Many of the larger projects are long-term and may take a year or more to complete and they are well financed, meaning they do not need to produce a significant ROI for quite a while and plan to take advantage of the up business cycle, which always followers the downturns like the one we are experiencing now.

It would stand to reason that the commercial real estate sector will be first to return to normal, far before the residential housing sector. Of course, some are calling out; Doom and Gloom, for instance the Commercial Real Estate Brokers at their annual association meeting in Chicago in late September of 2008, yet some like Mr. Sam Zell warned that; last year they said everything was great and would recovery; it tanked. So maybe we cannot trust the analyst's forecasts in the commercial real estate a leasing sector?

Expect things to be a bit tough in the first few quarters of 2009 for the commercial construction sector, but as empty buildings get leased and business expansion occurs, it will recovery nicely. Whereas, you can expect residential real estate markets and new home construction to be very slow for 11 months as inventory soaks up, before any major building of tracts hits the scene. Hopefully, this brief overview will get you thinking.

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