You are asking a question that has potentially a very long answer. In the past every economic downturn has anegative effect on commercial. It only makes sense that when businesses suffer the need for commercial space declines. Commercial is in fact suffering and inventories are growing. Basic supply and demand principals apply. The supply is growing and the demand is declining. A Gap study can be done estimating the gap between supply and demand on specific types of property in specific areas. It would be safe to say that every article that has been written recently estimates negative absorption. That translates to an oversupply. Oversupply usually means lower prices, greater vacancy, lower rents. Cap rates are rising as well which means investors are demanding higher rents or yields relative to the price. One would have to be quite brave to project out 5 years in this forum. At some point things turn and get better. It does not appear we have bottomed.
Jun 22, 2009