Posted by Carole VanSickle on Bryan Ellis Real Estate Letter, Tuesday, January 4th 2011

While many homeowners in the residential market are not feeling too keen on the upcoming real estate market events and forecasts of 2011, commercial developer CB Richard Ellis Group’s chief executive, Brett White, can’t wait for the year to get started[1]. White, who believes that there is “no question that we are in the early days of a recovery phase,” describes the commercial real estate market indicators for 2011 as “100 percent positive at the moment.” He goes on to say that it would be hard to find executives at large companies who would say that the “next two are three years are going to be extremely difficult,” and predicts that “the vast majority of major markets across the U.S. are turning positive both on vacancy rates and rents.”

White believes that the commercial market is recovering much faster than many economists predicted – and much faster than the residential sector – in large part because “lenders were incentivized not to foreclose on properties and not to put busted assets on the market. [They] did everything humanly possible not to foreclose.” As a result, prices in the commercial sector did not plummet on quite the grand scale that they have in the residential sector, which has allowed for a faster recovery because there was not commercial “foreclosure tsunami” that hit the market with a large influx of distressed assets.

Do you think that the “pretend and extend” strategy that White believes played critical role in saving the commercial market could have helped – or still could help – in the residential sector?

Maples Properties currently has 380,416 SF office space available for lease in Springfield, Branson, Nixa, and Ozark.  Due to the current economic downturn beginning in 2008, vacancy rates have risen to all time highs – 36% in Branson/Hollister, 27% in Nixa, even up to 9.8% in SE Springfield!  Here in the Ozarks, this is an increase of approximately 10% in office vacancies over fourth quarter 2008 numbers. 

Is the office market all doom and gloom? Absolutely not!

In the “2010 Commercial Real Estate Forecast” published by Commercial 1 Brokers in Branson, Stephen Critchfield, CCIM, reports the Branson market is “not significantly over-built in any commercial category…except the Class “A” office market.”  He goes on to say, “Due to downsizing, demand for small suites (1000 sq ft or less) have increased noticeably and are currently in short supply.” 

We here at Maples have found the same to be true.  We see both tenants and landlords are more aggressively positioning themselves to take advantage of the slow but steady recovery.  In Branson, Commercial 1 Brokers reports, “concessions continue to be offered to quality tenants.” Christopher Judeman, president of brokerage in the Americas for CB Richard Ellis, reports in the National Real Estate Investor, “there will continue to be opportunistic behavior by tenants and occupiers for the balance of 2010 and well into 2011.”  He goes on to describe ‘trendsetters’ who, “recognize that rents have fallen and concession packages have risen to a level that makes them comfortable in tying down strategic space for the long term.”

Maples Properties negotiated many short term office leases in 2008 and 2009 whose tenants must now decide if they go the long haul.  Looking at the current market, we advise our tenants to aggressively negotiate long-term leases as early in their renewal cycle as possible.  Robert Bach, senior vice president and chief economist at Grubb & Ellis agrees.  “More tenants are active now and willing to sign a long-term lease because they are more confident in their own outlook and realize now is a good time because of the concessions available.”

According to Brian K Miller in Colliers’ Knowledge Leader magazine, landlords are beginning to consider adding to their portfolios: “Vacancy is topping out and rents are bottoming out; it’s time to begin adding assets for the next up cycle.”

Critchfield believes “that this area continues to offer some great buying and leasing opportunities that have not been available in prior years.”

Doom and gloom?  We think not for those landlords and tenants who have the vision to be Trendsetters and negotiate the best deals we have seen for many years.  Call Chris or Susan at Maples Properties (417-883-9100) to discuss the many exciting opportunities we see for your business today!