Is the Next Commercial Real Estate Bubble Coming Soon?
Jun 27, 2011
At the 2011 Real Estate Finance and Investment Conference in New York,
members of commercial capital markets were debating whether the next commercial
real estate bubble is imminent. Across the country investors are falling over
themselves as they did in the last 'up market' and are looking to invest in
commercial real estate. At issue is where the upside to support these
investments is coming from.
In the end, rents are tied to job growth. Currently, the United States is
experiencing a very nimble job recovery with some evidence that the job market
could be entering negative growth once again. Ethan Penner, President of CBRE
Capital Partners suggested that the Feds are once again leading the industry
down the same path that led to the economic downturn in the mid 2000's. Penner
stated "It is incredible to me that we mistakenly believe that pumping untold
amounts of liquidity into the market is the answer to the problem to get asset
In the San
Francisco Bay Area market we are seeing an increase in job growth through
the tech sector, which in turn has given life to its commercial office market.
Rental rates are rising in the face of increased demand, which is due to job
growth. Without job growth vacancies will continue to remain high and values
should remain low. The capital markets see things in a different way. They have
large sources of money needed to invest; therefore hyping commercial real estate
investment makes sense to them. The problem is that hyping this market could in
fact lead to another economic downturn that could be far worse than the last
because there is less financial strength behind our current economy to absorb a
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Written by: Hans Hansson
Hans Hansson is President of Starboard TCN Worldwide Real Estate Services as well as a member of the Board of Directors for TCN Worldwide Real Estate. Hans has been an active broker for over 26 years in the San Francisco Bay Area and specializes in office leasing and investments. If you have any questions or comments please email firstname.lastname@example.org or call him at (415) 765-6897. You may also check out his website, http://www.commercialspacefinder.com/.