How market is faring depends on whether you’re a buyer or a seller

Can the market get any better than this? Can it get any worse than this? Of course the economy will get better by and by and the market will change.

For those looking to lease or buy commercial space in which to operate their business, we feel now is the time to make a deal. For those needing to lease out or sell space they own, now is still a difficult time. Perhaps the best that can be hoped for is to hold on for better times. And for those looking to buy for investment purposes, it’s a mixed bag.

Dr. Peter Linneman, NAI Global chief economist and principal at Linneman Associates, said that the nation’s economy bottomed out in July of 2009. He further stated that the recovery has started at least in the nation as a whole. The housing and auto sectors led us into the recession and will be the last to fully recover. But they too are showing positive signs.

He contends this recession is not a unique event in our history. Certainly it has been rather harsh, but not any more so than those in 1973 to 1975 and 1980 to 1982. So real estate will recover as it did in the past. The vacancy rate will drop, particularly because we have not been building for two years. Rates and prices will start back up after the precipitous fall of 2009. Employment will pick up, albeit slowly.

Nationally, company profits were up each of the last four quarters, prompting a rebound in the stock market. As jobs come back, the economy will pick up substantially and all of this will fuel the commercial real estate market.

To be sure, this is not a normal market. Distressed sales are the norm rather than the exception. But we are working through that inventory. As optimism infects the public, and it always does in this country, prices will continue to rebound and those who miss this market will be looking back at the lost opportunities.

I believe retail will be the first to recover. Location is still the key to this market in which the property’s location, appearance and access are integral to how well the business does. There are only so many great intersections or anchored centers. How many grocery-anchored centers have been built in this valley even in the boom years since 2002? Almost none. If your business depends on traffic past your door, there are only so many good locations. So great retail locations will lead this sector back to health.

Industrial space has traditionally been a tightly controlled commodity in the Treasure Valley. Vacancies are at high levels and there is more flexibility for buyers as to where they locate. But speculative building has not been seen for two years now so the upturn will absorb the vacancy fairly quickly.

Office has never completely recovered since the dotcom bust in 2001. But office rates are below what someone could afford to build and lease out for. Lease rates will increase if just from the inflationary pressure that is bound to flow from the federal deficit.

And the Treasure Valley is still a great place to work and live. Just ask BMC what drew it back here. The population is growing and so will the need for places to conduct business. Look for the first improvements in the office market conditions in desirable areas like Parkcenter, downtown Boise and the Eagle Road and Overland area.

Investments are starting to attract the wise and savvy investors. It will take cash or substantial equity to pick up the best deals. Anyone who still has cash or equity is savvy in my book. Residential lots sold in bulk are at prices less than the improvements costs. Commercial buildings are selling for less than replacement costs. Notes are selling at substantial discounts.

This cannot last. A little staying power here will yield great returns. We will be looking back and asking where did these new players come from. They will be coming from deals they make this year.

So if you have been laid off from your job, this is a recession like no other. But in aggregate this is another in a series of recessions or adjustments. Things will change as they always do but life will go on, the markets will improve and those who take advantage of this downturn will be tomorrow’s movers and shakers.

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By Ray Frechette