At this point, I would regard 2009 as tepid at best. Industrial/retail vacancies are at an all time high, new home start-ups barely at a pulse, the hotel industry remains cautious, and available credit, what little there is, drips into the market.
On average, I speak with 40-50 real estate professionals daily - everyone from lenders to developers, commercial agents, and general contractors; the once hopeful anticipation of a decent 2009 has given way to macro indignation. There appears to be symptomatic depression in every conversation with anyone who carries a vested interest in the real estate market.
I have been attempting to forecast 2010 for several months. Indicators initially displayed some recovery in the second quarter; however, over the past two weeks, I am beginning to sense that 2010 may be worse than 2009.
The CMI reported by the National Association of Credit Management report released November 2 for October 2009 suggests that a 50.1 index breeches the natural stance of 50 thereby indicating a positive move toward growth.
It is my contention real estate is a critical pathway to overall economic recovery and without the credit market loosening cash/liquidity, we are looking toward a disastrous 2010.
Key factors to watch in forecasting 2010:
1. Manufacturing output
2. Oil, strength of dollar, gold
3. The REAL numbers behind jobless claims/unemployment
4. Holiday retail season [albeit, a rather short indicator]
5. Geopolitical issues
There is an incredible amount of existing cash on the sidelines which will require the appropriate credit to get projects off the ground. I can say this with a great deal of certainty as we have been engaged in “budgeting” dozens of projects. We have walked several parcels averaging 800,000 square feet where owners/developers are attempting to get a read on overall project costs. The vision reflected in these meetings shows investors in the ebb and flow of the next wave.
My conclusion: The pool of potential growth will quickly evaporate without a tsunami of credit. Let it rain.
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