With seemingly relentless doom and gloom infiltrating all reports on Commercial Real Estate recently, there was at last some ‘official’ suggestions of a modest recovery on the horizon.
In a recent speech Dennis P. Lockhart, Chief Executive of the Federal Reserve Bank of Atlanta, gave hope to the signs of a modest recovery, albeit a slow and measured one. He predicted that the recovery will be slower than in recent recessions, with more time needed in this current climate due to the disarray of the banking structure, and the housing market’s difficulties.
Buyers on the Sidelines
There are still too many houses for sale in the U.S., with not enough buyers and credit still tight. The majority of Amercians are still in no mood to spend until they feel confident the markets have ‘bottomed out’.
Lockhart, a member of the Federal Open Market Committee, which sets interest rates in the U.S. emphasised that the economy was undergoing radical changes, and the economy would take time to develop accordingly. The banking system, which has been decimated by the credit crunch (and no doubt started the fiscal nightmare we have witnessed) is still undergoing massive changes and remains fraught with uncertainty.
A New Banking Industry
We are still to witness over the next 2 or 3 years how the industry will emerge from the fiscal battle now being waged, and who the survivors will be. Contrary to what may be believed after reading media reports, many banks are still in deep financial trouble, and are struggling for survival.
Lockhart said that the U.S. economy has to start afresh, and not be based on a consumer fueled by debt and excessive leverage. Listeners at the meeting were quietly reassured by Lockhart’s sentiments, and many feel that the housing market has turned a corner, and in turn will fuel a recovery in the Commercial Property market.
Bottoming Out
Many Real Estate agents are reporting a renewed interest in the market over the last 2 months. Once consumers have confidence that the market has bottomed out, the pent up demand for property shall return. There is a huge amount of investors on the sidelines waiting for the first glimmers of an upturn, and to start buying Commercial Property sites.
Many real estate watchers have noticed that the alarming fall in commercial property prices has now ceased, ending in the first quarter. The recovery will be gradual, with many seeing signs now of stabilistaion in the market.
Crucial 12 Months
Over the coarse of the next 12 months, there will be opportunities in abundance of owners selling off prime property sites, as they face difficulties acquiring refinancing loans, and are forced to sell sites to stay afloat.
Banks need to make more loans and finance available to businesses large and small who have weathered the economic downturn, to help finance expansion and create more jobs.
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