Despite gloom, 2009 holds good commercial real estate opportunities

NEW BEDFORD, MA--Day after day, world, national and local news headlines are showing more doom and gloom in the real estate industry, notes Richard E. "Rick" Barnes, (top right photo) vice president, Whelan Associates LLC, New Bedford, MA.

Foreclosures are up, retail stores are closing and lay-offs continue, thereby reducing demand for commercial space.

Even the "luck of the Irish" has faded as Ireland's infamous real estate boom has fallen hard in this global financial crisis.

As the world economy continues to slump, commercial real estate assets are likely to see rents fall and vacancies raise throughout 2009 and into 2010, according to a new report issued by NAI Global Real Estate Company.

(One Financial Plaza, Hartford, CT, top left photo)

This has an obvious impact on real estate values. But as a business, real estate still holds opportunities both nationally and locally.

Despite the perception of doom and gloom, deals are happening.

What is not seen very often in the headlines is that real estate transactions are still getting done.

Yes, business activity continues, albeit not as robust as in previous years. Properties that offer solid real estate fundamentals are still attracting significant interest from real estate investors.

Nationally, major transactions occur every day, in every property sector, in every market across the country.

(300 South Wacker Drive, Chicago, middle right photo)

The industrial market is reeling from the impact of massive lay-offs across the country. However, 2008 proved to be a banner year for activity in the southeastern Massachusetts industrial parks.

The retail sector has been hammered nationally by slowing consumer spending resulting in many store chains declaring bankruptcy and some even closing entirely.

However, on the local level, stores and restaurants continue to open along the Southcoast. For example, in recent months, downtown New Bedford has seen new boutique stores and restaurants open for business.

(Galleria shopping center, Atlanta, middle left photo)

The office market across the country has continued to see declines in occupancy levels, thus putting pressure on the values and ultimate sale prices. Office buildings in major markets such as New York and Washington have seen values plunge 20 to 30 percent.

Conversely, a major Southcoast multi-tenant office building has gone from a 62 percent occupancy 18 months ago, to a 96 percent occupancy today. Another prominent Southcoast office building has recently sold at a record $200 per square foot.

All across the country, there is a countless number of properties available for sale, from Class A, 100 percent leased single and multi-tenant properties, to aged and vacant buildings providing a huge potential for an opportunistic developer.

While the headlines would lead you to believe investors are on the sidelines until the market rebounds, savvy investors are still at work closing deals.

This holds true in the Massachusetts Southcoast market as well. In the fourth quarter of 2008, more than $50 million of commercial real estate traded hands in Bristol County.

(John's Creek Shopping Center, Jacksonville, FL, bottom right photo)

A like amount traded in Plymouth County during the same period. This all occurred during an unprecedented election period overshadowed by a major financial meltdown.

As the crisis continues into 2009, leaders in the field recognize that the current real estate cycle provides a unique opportunity to expand their portfolios and create wealth. Despite the predictions of doom and gloom, many believe that the transactions during the next three to five years will prove to be the best buying opportunities that have come along in decades.

CONTACT:

Richard E. "Rick" Barnes, vice president of capital markets, Whelan Associates, LLC, Union Square Office Centre, 174 Union St., New Bedford, Mass. 02740; 508-984-4100; or e-mail at rebarnes@whelanassociates.com