Tuesday, May 17, 2011

Not Everyone Agrees That Things Are Improving

Forget the fact that, IMHO, I am seeing things improving here on the ground in Central Ohio, and that various industry publications that examine the commercial/investment real estate market with a careful, independent eye generally concur.

Still, there are those who believe CRE has a long way to come before things are better. True, some markets fared far worse than others and have a longer climb up the ladder out of the well. Las Vegas, southwest Florida, and southern Michigan are three that come to mind immediately. The recovering is coming fast in Lee and Collier Counties in Florida. Las Vegas is showing signs of life. Michigan's recovery will be, like the song, a long and winding road.

Still, this forum -- while a fusion of (mostly) my opinion, industry reports and the thoughts of others -- is not a one-sided place for all things retailMUHindustrialofficelandspecialtyusecommercial. And so I offer some contradicting opinions of the future of commercial/investment real estate.

Reuters News Service is out with several pieces during the past month that that we have a long way to go. True! I would agree that things are not rosy everywhere.

An earlier Reuters piece in February talked of prices growing too high too fast, with lagging rents unable to justify high prices. This I definitely HAVE seen. Unrealistic owners who either "need" or "want" a certain number, and seem unable to see that their income statements don't come close to justifying the asking prices. While those properties still are out there -- and are still available largely due to that gap -- properties coming to market recently seem to be priced with a dose of reality.

CNNMoney was more blunt, but for reasons I am missing someone there doesn't get it. A contributing writer wrote that CRE is still a gamble. DUH!!! HELLO!!! ALL investment, whether in stocks, gold, commodities, or a personal loan to a favorite nephew, is a gamble. Overall the story is not too bad, BUT The headline is so misleading it isn't funny. Keep in mind, also, that CNNMoney rarely writes on commercial/investment real estate, showing its continuing penchant (bias?) for the stock market. There ARE no guarantees with any kind of investment, and the editors overseeing the work of Mr.Kit R. Roane, a contributor to CNNMoney, should know that! So that story really doesn't count. But I included it to show how there are some in positions of influence who, for lack of a better way to say it, have no clue what they are writing about. Or in this case I should note that Mr. Roane's story never uses those words. The misdeed was the fault of the CNNMoney headline writer. Inexcusable......

A piece I tweeted today at @BrentGreerCRE concerned the worry that our nation's infrastructure is becoming so fractured that it is the second part of a "one-two punch" of problems facing the United States commercial/investment real estate market. Maureen McAvey, an executive vice president at Urban Land Institute, stated the obvious, but it is a problem -- we are not keeping up with our infrastructure needs, let alone developing new more efficient modes of transportation, etc. Good points all, which may have an impact on future values down the road, particularly with investment from overseas in the decades to come.

And an accounting rule change may force banks to disclose that they have many more troubled CRE loans on their books. Only time will tell...

The bottom line? Opinions are diverse. Facts are facts, and improvements or declines are trending differently in different parts of the U.S. Sufficed to say, things are improving here and there. Do your homework and learn what is happening. Like anything else, don't just jump into an investment or trade out of one because you "heard" it is a good deal. Overall, CRE is improving. In much of Ohio, things are improving though there are pockets of economic trouble here and there. Central Ohio remained relatively stable, but still saw a slight dip. The old saying that all real estate is local never was more true.

The best investor is the most informed. And that is what CoC strives to do for readers. Inform. Thanks for stopping by.

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