Real estate investors expect slump to continue well into ’09

Most real estate investors believe the market will not recover until well into 2009, according to a survey, conducted by Colliers Investment Services Group, a division of Boston-based Colliers International, a leading global real estate services firm.

The consensus among investors responding to the survey is that real estate transaction volumes will not pick up until the third quarter of 2009, at the earliest. Colliers’ survey and resulting 2009 outlook indicates that 22 percent of investors foresee being active buyers in the first half of 2009, but 78 percent said they would not venture back into the market until the latter half of the year.

According to the survey results, many investors believe values will continue to trend downward well into the coming year.

In addition, the frozen credit markets have left many buyers on the sidelines just as property owners are reluctant to sell as prices fall.

"Even with extensive monetary and fiscal stimulus by U.S. policymakers and others, including (the recent) historic Fed rate cut, the banking sector has undergone significant damage, and this has greatly diminished the appetite for lending," said Bob Pinkard, chairman of Colliers Pinkard, the Washington, D.C.-area affiliate of Colliers International. "Deleveraging is underway in all asset classes, and the U.S. commercial real estate market is no exception."

Colliers International said it expects the credit markets to "begin to stabilize" in 2009, which will slowly bring investors back into the market. Colliers also foresees very little in the way of new commercial real estate construction in 2009, and ongoing weak demand for all types of space, but leases will be signed, and properties will trade hands on a limited scale.

"Who will be buying and selling in 2009? In every downturn, opportunistic buyers have always stepped forth," said Ross Moore, Colliers International’s executive vice president of market & economic research. "High net-worth individuals, off-shore investors and private equity groups will be scouring the market in search of attractively-priced properties. Institutional investors with a long-term investment horizon will also be availing themselves of the opportunities that are certain to arise, even if the near-term outlook is gloomy. Sellers will include lenders looking to off-load assets they no longer want to carry; private investors seeking to free up capital for other uses; institutions that aren’t prepared to actively manage impacted real estate; and finally funds that will have been forced to liquidate as investors call in redemptions."

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