The article linked below is so transparently misleading the publication should be ashamed to have even published it.
I had to read no further than the first response to the reporters question that asked how it is Mike Kirby’s (Green Street Advisors, a Real Estate Investment Trust (REIT) research firm) “data” shows values are up 20% from the lows…the answer
“Our view on property pricing differs from conventional wisdom. Some other indexes, published by Moody’s (NYSE:MCO) and MIT, show that property prices went down 40% and that they’ve generally stayed there. But we show they’re now down 25% from their peak. The reason for the difference is that their indices track transactions – ours tracks deals that haven’t yet closed”
This has to be the most ridiculous statement yet by a commercial real estate person, be they a so called data provider or working member of the industry. Even the Brokerage community would not say such things. An article just yesterday stated although REITS for the most part may have dodge some bullets since this commercial real estate collapse began, by propping up their cash reserves by selling more equity etc, the article said what is troubling is the REIT’s in general need to firm up their underlying fundamentals. You all should know what that means…declines in overall FFO due to higher vacancy rates etc.
The most chilling aspect is Mr. Kirby actually expects the reader to believe those involved in pending transactions will provide any information whatsoever on their pending deals never-mind at what price the deal is being made. In addition he doesn’t disclose how many of these “Pending” deals he is using for his statistics.
To get that information those directly involved with the transaction would be breaking just about every fiduciary duty they are pledged to keep to their respective clients.
The irony is he then backs away by saying vacancy rates are still high though.
Yes there has been a slight uptick in market activity in NYC & DC, but the relative vacancy rates are still near record highs, and for the DC region The Government safety net for the commercial real estate sector will start to wane as the GSA is under Executive Branch orders to start shedding space not taking more space.
You have to love it when the commercial real estate universe is centered on NYC & DC as if no other parts of the United States mean anything. How condescending and elitist can you get.
Lastly, his last statement of what goes down must come back up belies reality after he admits that the commercial real estate market “ you know, it’s not going to be a good year next year, or even the year after – the cash flows are going to stink “
So if investors buy now, and buy using cash and no debt, they still will have to wait it out for a fairly long time.
And although investors have reportedly been disappointed because more distressed properties haven’t made it to the marketplace due to the lenders “pretend and extend” policies, they should look at that as a blessing in disguise. The banks will be off-loading those properties after the “extend” period expires as evidence mounts that the market is going to bounce around the bottom for quite some time to come.
With the Government’s out of control spending, looming tax increases, the unfriendly government stance against business of any kind, why in the world will companies want to expand and rehire?
Small businesses in particular which everyone in the media dismisses, are going to get hammered with more regulation which adds to their cost, continuing lack of available credit, even the Fed Chairman said as much this week as he struggles to find a rational way of helping small businesses get much needed financing. And remember small Businesses account for over 60% of the new employment created in the United States.
Read the business sections carefully and you will see companies still slashing jobs, 3800 layoffs announced by Wells Fargo on July 7th, Lockheed Martin (NYSE:LMT) is offering early retirement incentives to thousands of employees announced today, and list goes on. You have so many workers who have given up looking for work.
Add the job losses in the Gulf, the Drilling Moratorium which will kill somewhere near 80,000 jobs, and we have just a great looking prospect for a recovery. Double dip worries are also a laugh because if anyone is buying that we came out of the recession yet is dreaming.
So Mr. Kirby, I’m very happy for you that you are now operating as more than a shill for the commercial real estate industry you are now a Prophet reading tea leaves.