The economy has begun to show some signs of stabilization, with the rate of decline in a number of economic indicators slowing down. Despite this “improvement,” there is significant concern that the recovery may falter unless the housing market and employment scene begin to show more strength. The latter is particularly important to consumers who remain on the sidelines and thus temper the upside potential of the economy.
With respect to commercial real estate, we can expect significant additional erosion in values over the next 12-18 months despite the recent declines in mark-to-market properties which are down some 35% from the peak in 2008. This situation will be accelerated by two major drivers.
First, the wave of distressed assets will start flooding the market over the near term, rippling well into 2010.
Second, a tsunami of refinancing activity will hit the market beginning in 2010. Absent dramatic interventsion, the industry has no safety net to fall back on.
In this environment, the state of the economy will be less important to commercial real estate than the state of the capital markets, capital flows and real estate fundamentals. However, it would not be prudent to ignore the economic environment as the situation could become even worse than it will if the fledgling recovery stumbles. Following are some economic and capital market indicators to watch.
Federal Funds Rates
The Fed has done it's part; can it hold in light of inflation pressure? MORE....
Total Retail Sales
The plunge in retail sales has flattened out; is there a rebound coming? MORE....
The housing market may have hit bottom in minds of homebuilders...
Global Business Confidence
Consumer Confidence and Retail Sales
Stock Market Flash
Global Stock market as of 11/19/09
Dow Jones Industrial Average (DJIA)
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