News & Research Archive

Tale of Two Commercial Real Estate Markets

May 01, 2012

 

This past week I attended the Principal's Meeting of TCN Worldwide in Toronto Canada; TCN Worldwide is one of the world's largest commercial real estate networks serving over 210 markets. The Principal's Meeting is probably one of the most important meetings for its members as well as probably the most important gauge as to the health of the commercial real estate market on a worldwide scale. My firm, Starboard, is the TCN affiliate covering the San Francisco Bay Area. Unlike our international competitors; CBRE, Cushman & Wakefield and Jones Lang LaSalle, our network is made up of a cross section of different types of firms offering a variety of different commercial real estate services. Therefore, this platform offers excellent insight into what is happening in commercial real estate.

Two years ago, there was serious concern over the ability to exist both in terms of individual firms as well as our overall network. The commercial real estate sector was demolished with the crash of the financial sector. Doomsday was the main topic of the Principal's Meeting. Last year it was clear that all markets had stabilized and most firms had taken the necessary steps in cutting back operations to survive.

This year the meeting was much more upbeat but the majority of the markets still had yet to see a real rebound; instead, most indicated that their markets were simply flat. There were some exceptions: the San Francisco market is experiencing a tech boom with low vacancies, higher rental rates and investors pushing up real estate values, while Washington D.C is enjoying the benefits of our expanded government. Internationally, London, England is seeing office vacancies rates back under four percent; some of the lowest vacancy rates in the world.

Most commercial real estate firms in the rest of the world are making deals but not at the levels seen in 2007 or during a normal market. Two contributing factors to this problem are available credit and flat job growth. Banks are still holding back growth with very conservative guidelines preventing development while the job growth rate in white-collar jobs as well as manufacturing is flat.

The biggest elephant in the room during our meeting was the upcoming Presidential election. Typically, during other elections our market goes silent, awaiting a decision as to the direction the country will be going. Our only hope is that the market ignores the election and that, no matter which direction our country decides to go, we as a country are poised for growth.

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Written by: Hans Hansson

E-mail: hans@starboardnet.com


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 27 years in the San Francisco Bay Area and specializes in office leasing and investments. If you have any questions or comments please email hans@starboardnet.com or call him at (415) 765-6897. You may also check out his website, http://www.commercialspacefinder.com/.

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