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| NAIOP New Jersey recently held its annual meeting and real estate forecast. Panelists included (L-R) Lisa Pendergast, managing director of the Jefferies Group's MBS/ABS/CMBS group; David Houston, president of Colliers Houston & Co.; David Welch, CFO of SJP Properties; Patrick O'Keefe, director of economic research for J.H. Cohn; and Jeff Milanaik, NAIOP New Jersey President. Not pictured is the event moderator Peter Grant, deputy real estate editor of the Wall Street Journal. |
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Release Date: Wednesday, February 03, 2010
Media Contact: Evelyn Weiss Francisco (201) 796-7788
Economic Recovery Predicted, But the Rebound Is Expected To Be Slow
Panel of Experts Discusses Slow Job Growth, Excess Office Inventory, Other Factors at NAIOP New Jersey Annual Meeting
The economic fall-off has likely bottomed out, but the fall-out hasn't been fully felt, and the coming rebound is likely to be slow in taking shape. That was the message delivered by a panel of experts to the 250 attendees of NAIOP New Jersey's Annual Meeting and Real Estate Forecast at the Short Hills Hilton.
"There are a lot of questions about what's going on," said Peter Grant, deputy real estate editor of the Wall Street Journal and moderator of the discussion. Terming the recession "the near melt-down of capitalism," he credited the fact that developers went to Washington, D.C., asking for help, with resonating in the larger economic sense. "For commercial real estate, we haven't seen the spectacular failures this time as we have in the past."
Locally, Patrick O'Keefe, director of economic research for J.H. Cohn, applauded NAIOP New Jersey's advocacy in Trenton for its impact on getting measures passed that helped stabilize the industry. "All things considered, people are feeling relatively good compared to past downturns. There has been no 'Titanic'."
In the larger sense, "a recession technically ends when things stop getting worse but they're not necessarily getting better," O'Keefe explained. "GDP grew in the third quarter of 2009, and other indicators are trending upward. But the problem is that we're still losing jobs."
How will recovery proceed? "Because it was largely caused by a financial crisis, we expect it to happen slower and take longer than past recessions," O'Keefe predicted. "For non-residential real estate, 2010 will not be a good year because of the slow job growth. Employment will be the driver for what those in commercial real estate want to do." And for New Jersey in particular, he predicted a similar scenario of rising GDP but lagging employment, with non-residential construction lagging throughout the year.
According to David Houston, president of Colliers Houston & Co., 2011-2112 could be a watershed period because that is when "the deals done in 2006 come due. What will happen then remains to be seen. We still have more office space than we need, and it is going to take a long time to absorb that. At the same time, the buildings built in the 1980s now need to be refurbished-where is the money to do that going to come from?"
And while the industrial sector is driven by distribution, the office sector is driven by job creation, "and I can't see the need for new office construction," Houston concluded. "The 'store' is full, and there is a lot of stuff left on the shelf. There may be increasing confidence to do things, but there is still too much inventory."
As far as the capital markets, "there has been some improvement," said Lisa Pendergast, managing director of the Jefferies Group's MBS/ABS/CMBS group. "Some banks and life companies are in a position to lend, but lending is primarily in small sound bites. People are not comfortable in lending for big deals."
Much of the activity, in any case, is in the form of refinancing, Pendergast noted. The general volatility of the market "makes it difficult to quote and close a loan, and see where it's going to price." And while the various federal government programs have certainly helped, "the issue is still one of finding the right loans. The capital markets will continue to focus on single-borrower transactions. Some CMBS platforms are re-emerging, but it will be a slow recovery process."
From his perspective, "we're at the bottom, but we see things starting to come back, said David Welch, CFO of SJP Properties. "We have seen a change in attitude, and we think people are going to start making commitments.
"The market will improve," Welch concluded. "We're just not sure of the trajectory."
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