Check out Pimco’s June 2010 US Commercial Real Estate Project. Looks like there will continue to be trouble ahead. U.S. consumers have curbed their unsustainable spending habits and increased their savings rate. Continued high employment will also help drag down CRE.  According to this report, we may not see peak 2007 prices again until 2020.

Certain retail properties could also struggle in the New Normal. Many retail properties built in anticipation of large housing development will simply suspend operations, because sustained reductions in the home ownership rate mean that many planned housing developments will not restart for years.”

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8 Responses to Outlook for Commercial Real Estate Does Not Look Good

  1. Politicians will raise taxes unless... says:

    Watch what happens when weak short term minded politicians raise taxes.

    Contact your elected officials and tell them to reduce pay and benefits for their most overpaid public sector employees.

    If taxes go up real estate foreclosures will increase and prices will be more depressed.

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  2. todd says:

    Because reducing taxes will make businesses spend the small amount they have on labor costs? The logic doesn’t follow. Businesses are maximizing profit now by cutting labor, increasing productivity, and reducing costs. Keeping taxes low will do nothing to dig us out of this crisis. Not that more taxes will necessarily either, but it’s the wrong question all together (taxes vs less taxes), generally put forward by the people who already have too much money anyway.

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  3. Rog in Miami Gardens says:

    To Politicians will raise taxes unless:
    Public sector pay and compensation are already being cut in many agencies and areas. Most agencies have had hiring freezes for the last THREE years. That’s a long time. I work in student services at a local public, community college, and in our department alone, we laid off eight staff earlier this year at a time when everybody and their Aunt Fanny are going back to school, so here we are trying to serve our community with a decidedly smaller staff, but with an increase in clientele.

    The problem with commercial real estate is that there is an over-abundance of square-footage in the first place. It seems to me that the entire “boom” that we experienced was simply based on nothing. The wealthy gambled with other people’s money, messed up and now are footing everyone else with the bill.

    I know this isn’t the place, necessarily, for this discussion, but many argue that laissez-faire-style economics helps to add value to the economy and to lift people out of poverty. However, I read somewhere that this past disaster extracted trillions of dollars out of our “traditional” economy.

    A system that requires citizens to continuously borrow money for it to stay a float will not stand.

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  4. Prem says:

    Rog,
    Citizens borrow money because they don’t have it. Citizens getting money when it’s unlikely to ever be paid back does nothing to help, but these kinds of loans are encouraged by the low interest rates of the Federal Reserve.

    And if it’s Miami Dade College you work at, I’ve noticed first hand the cut in human resources, but that will never make up for the lack of customer service, efficiency, and professionalism displayed at that institution in many of its campuses for over 6 years now, well before the current round of cuts and budget problems.

    Like many other bureaucracies, public colleges lack the systems of competition which lead to cost cutting and improvements in efficiency.
    Having attended MDC both in high school and now as a full time degree seeking student, I can say that changes in organization have been cosmetic.
    Organizations like MDC, or MDT can save money and time by implementing increasing transparency, and empowering “customers” through information and knowledge. Instead, left in ignorance, students are dependent on services to get even the most simple of goals accomplished.

    So you don’t think I’m picking on you, let’s talk about the method MDT uses for choosing routes. Does anyone know what that is?
    It’s a guy, sitting in an office making guesses, but never soliciting suggestions or recommendations from the public, yet often I hear even bus drivers complaining about the idiotic route decisions made by this unnamed administrator. Maybe MDT could make money if its routes appealed to more people, and got them places faster.
    This has not really happened with any of the changes made by MDT in the last few years, despite desperate and drastic attempts.

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  5. Rog in Miami Gardens says:

    Don’t get me started on the Federal Reserve. Lol. At any rate, I’m speaking to a deeper, systemic problem with American-style capitalism. It’s propped up by cyclical debt. However, what happens when we stop borrowing or banks stop lending? I think you see the answer playing out quite tellingly in our current economic environment. The Europeans do have personal debt too, but at a far lower rate than we do. My point is that it’s not only about the feds or dubious banks and lending institutions. There is something inherent in our collective psyche that needs to be addressed. WE, as individuals and even collectively, need to restructure our view of and dependence on debt.

    Now, in terms of your statements pertaining to Miami-Dade College: There are inherent systems of competition in student services; it’s simply difficult to apply them in reality. One of the reasons students might experience long wait times or unprofessionality among staff is simply because there isn’t enough staff to accomodate large volumes of students. MDC isn’t like McDonald’s or Burger King. Each student has — in many cases — specific needs that have to be addressed individually. Miami-Dade College’s board of trustees wants employees to cater to students on an individual level like the proprietory schools while at the same time adhering to strict standards from Tallahassee with outdated technology and software for, literally, thousands of students. You can’t have it both ways, so of course service quality is going to decline.

    Now, in terms of MDT: I have seen a huge improvement in their outreach. The challenge is that many commuters don’t care enough. They tend to get riled up when fares are set to increase or when a bus driver upsets them, but otherwise, they simply complain under thier breaths instead of directing the ire and angst at the propery entity. As an advocate for transit, this frustrates me because I feel like I’m alone out here. Lol. Of course, the website proves that I’m not, but it certainly feels that way when I use transit. Sadly, most transit users in my neighborhood simply see public transit and bike commuting as a stepping stone to getting a car; many of them couldn’t care less about improvements. I know I’m painting a broad brush, but I’ve been delving into this for — at least — a decade.

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  6. Miami-Dade politicians just raised taxes says:

    Miami-Dade County elected officials weakly took the recommendation of their overpaid administrative staff and voted to raise taxes.

    Commercial properties and residential properties have gone into foreclosure due to excessive costs and a lack of rental income due to a lack of tenants. As Miami-Dade County elected officials raise taxes that will mean higher fixed costs and higher expenses for Miami-Dade property owners and tenants. More foreclosures will result.

    God forbid elected officials reduce the pay and benefits for overpaid public sector employees.

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  7. Prem says:

    They certainly couldn’t imagine that, with public unions breathing down their throats. And their friends heading many of the departments.

    Rog,
    I’ve also been using MDt for about a decade. its problem lies more in its fundamental sense of purpose. The public sector has utterly lost the notion of public service. MDT and other organizations are not only supposed to serve the community, but ideally are part of the community. Most MDT employees don’t take the bus to work. I know some that do, and it’s certainly encouraging, but whenever I talk to them about issues I find, they generally agree with me.

    I’ve also been dealing with MDC for years now. From talking to classmates and friends, I know that student’s problems are not actually that diverse. Considering the responsibilities of any particular department, there aren’t that many issues they can face. The forms a student usually gets before seeing any particular staff member are very vague. There must be some way to save time, which would also be money.
    For instance, I don’t understand why almost all the administrative departments sue archaic and terribly time wasting software. For instance, one department doesn’t have access to information available to some other department, but they REQUIRE that infromation for doing their job. So I have to print this or that form a bunch of times every semester because NO ONE CAN SEE WHAT THEY’RE SUPPOSED TO SEE. This is idiotic from any standard. The library, computer courtyard, bursar, student life, and the bookstore should not be asking me for a copy of my schedule, or any other document created by any other department.
    I’ve already sent an E-mail to Eduardo Padron asking him why he’s not using google yet. Google services would eliminate this need for constantly printing redundant inter-collegiate information. That’s just one example I have of the kind of crap I don’t understand MDC still forces students to put up with.

    Well, aside from the fact that I think many of the employees, especially administrators, obviously lack the creativity and understanding of contemporary best practices to actually make the school get any better.

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  8. Rog in Miami Gardens says:

    Prem,
    I agree with most of your assessments. My Mom would always say, “Those who make it to the top of the mountain carry the lightest load.” I was always baffled by that addage, but the more I’ve worked in private and public institutions, the more I’ve come to understand its meaning. In the context of MDC, employees: in order to move up the so-called ladder of success, must shed the “baggage” and the “weight” of the everyday stuff. That is exactly how private and public organizations are structured these days, for the most part.

    Administrators are so busy fund-raising and partaking in photo opps., they don’t have the time to be bogged down with the daily operations (which is what really matters) of an institution.

    Additionally, whenever those amongst the lower ranks have an idea, it is either ignored or so horribly altertered that by the time it is actually implemented, it looks nothing like the original plan; morale, as a result, suffers, which inevitably means that lower-ranking employees shy away from providing any, meaningful imput in the future.

    Finally, another problem is that M.D.C has this incorrigible habit of coercing employees to do “other duties as assigned” (being voluntold) that sometimes take up a considerable portion of their day that could be used to complete the tasks for which they were hired. There is a running joke that when you apply for a position, pay attention to the very last line at the end of the list of your “central” duties that says “Other duties as assigned” because that is going to be 75 percent of your ACTUAL duties, lol. At any rate, this creates a lot of duplication of tasks which is wasteful.

    It’s neither here nor there, but I just wanted you to understand that we aren’t all daft. It’s sometimes a confluence of issues, and thus the nature of the beast.

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