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Commercial real estate industry bids farewell to ’09

The No. 1 best thing about 2009, according to Thornton Oliver Keller industrial market specialist Dan Minnaert, was Dec. 31.

He was just one of several Treasure Valley speakers at the Building Owners and Managers Association‘s 13th Annual Boise Commercial Real Estate Symposium to bid a not-so-fond farewell to 2009, joking grimly about its challenges.

Many of the speakers predicted that the worst is behind us.

Debbie Martin of Boise-based DK Commercial said those looking for office prices to plummet further are going to be disappointed – the bottom is here.

“Prices aren’t going to get much lower, if any,” she said. “No one is going to pay you to take their property off their hands. Landlords aren’t going to pay you to move into their space. It isn’t going to happen. Waiting for prices to go lower is not worth missing the window of opportunity you have in front of you right now.”

And for the most part, prospective office tenants shouldn’t be looking for a huge surge of loan defaults in the commercial real estate industry, Martin said. She pointed out that when people talk about that danger in the industry, they’re including talk of unanchored retail space, residential subdivision lots, bare ground, vacant buildings and partially leased, underperforming buildings.

And she said when banks do foreclose on properties, competition to buy them is going to be stiff.

Colliers International‘s David Wali, an investment specialist, took on a less encouraging tone while elaborating on the danger commercial real estate is facing. He said there is “very, very, very limited liquidity in credit markets,” and with banks’ loan-to-value ratios shrinking, a rising equity gap could mean trouble.

“Someone is going to have to plug the gap, lenders are going to have to refinance, or some other magical, mystical thing is going to have to happen,” he said.

And Lon Lundberg, a property manager with Thornton Oliver Keller, cited a report that two-thirds of maturing loans in the next few years will not be refinanceable.

Overall, the outlook was cautious. None of the local speakers predicted a remarkable upswing in the health of the industry, but nobody predicted a collapse, either.

Steve Scranton of Washington Trust Bank emphasized the uncertainty the real estate lending world is facing, with Congress looking to more strictly regulate lending, the possibility of capital ratios rising from 10 percent to 12 or 15 percent, possible new fees for banks on the horizon and negative public sentiment toward commercial real estate, which he blamed on the media’s coverage of predictions regarding an impending implosion of the commercial real estate market.

“An investor is not going to stick their neck out and invest in what the media says is going to crash,” he said.

Bright spots from 2009 included various construction projects completed or in progress around the Treasure Valley, including Aspen Lofts, a WinCo distribution center, a University of Phoenix building, various projects at Boise State University, the PetSmart by the Boise Towne Square Mall, Portico in Meridian, Dick’s Sporting Goods, Hobby Lobby, Pristine Pools, the Nampa Gateway Center and Treasure Valley Community College.

Boise Mayor Dave Bieter said he’s encouraged by the 36 businesses that opened in downtown Boise last year, and by tech companies like Clearwater Analytics, WhiteCloudAnalytics and CradlePoint Technology.


About Dani Grigg

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