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foundation for both business and financial investment.
All of these factors are driving demand for all types of real estate, which means absorption is strong and growing for all sectors, even if it is below long-term averages, especially for a growth period. Plus, the best years are yet to come for this rebound.
Meanwhile, despite the strong demand, supply remains quite tame by historical standards. Construction is well below average rates and perhaps one-third to one-half of rates typical during expansion periods for all sectors except apartments — and even there, we are only now getting back to average rates.
The main reason: Despite recent gains in most sectors, both occupancy and rents remain well below prior peaks — and generally below the level required to support new construction. Which means that we can expect several more good years for property markets, as the surging property demand translates into rising occupancy and rents for existing properties.
Of course, our economy faces some risks, though compared to where we've been, the
risks are rather benign. They include:
* Foreign economic slowdown. This is now the biggest risk for the U.S., compounded by the surging U.S. dollar, both of which may limit our exports.
* Geopolitical turmoil. This seems a less immediate threat, though with potentially greater downside implications.
* End of the Federal Reserve's easy monetary policies. The timing and market reaction are still to be determined.
* How much longer can the recovery continue? The expansion already exceeds the post-WWII average.
But these negative risks are balanced by the benefits of lower energy prices and continued low interest rates, which provide important
upside thrusts to the economy. Overall, the risk profile is more sanguine and the economic outlook more positive than it has been in many years.
Inn sum, it was not a smooth ride to recovery, and for many households, it still doesn't feel very good. But for those of us in the
property sector, this really is shaping up to be an outstanding expansion. And with all the drivers firing in the right direction and risks relatively tame, there's still a lot of road to run in this recovery.
You might even say that this is a "Goldilocks economy for commercial real estate" — not too cold, not too hot, but just about right.
10
DEADLY errors that CRE occupants
make
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Mr. Blumenfeld said there was more competition among lenders for the loan than he expected and there “was a little bit of a bidding war” before he ultimately went with Cantor, which he had used before.
“Money is more readily available, and for performing assets that have cash flow, there’s a lot of different options,” he said.
But as lenders fight among themselves to win deals,
By Eliot Brown
Posted on wsj.com on Jan. 13, 2015