Innovation necessary for commercial market improvement

The commercial market may need further innovation to continue improvement with a difficult economic situation.

There may be some concern from property management companies regarding the slowdown in the economy, despite many improved aspects since the economic downturn, according to a report from Deloitte.

There are many issues that could be big factors for commercial market issues next year, but by taking precautions, many investors and other industry members could be in a better position.

"Overall, we are seeing recovery in commercial real estate activity; however, the pace of recovery is likely to be more modest across several property types until the broader economy picks up,"  Bob O'Brien, vice chairman of Deloitte. "Sustainability is gaining a lot of traction in the real estate industry, and there is renewed interest in foreign investment, especially in emerging markets. In addition, investors from emerging countries like China are looking to the U.S. for stable investments."

While the industry's fundamentals have improved significantly in the past few years, these may not show the same marked gains next year, the report noted. This will likely be due to a smaller amount of construction and completion of new properties, which could affect revenue growth. However, while the retail, office and industrial sectors will struggle, there will still be improved levels of apartment and lodging sector growth.

Market issues include sales and funding
Lending has also been an ongoing issue for the market, and this should continue into next year. The report said that lending standards have improved, but many financial institutions still dealt with a large amount of debt that is maturing. Additionally, commercial mortgage-backed securities are elevated.

Transactions of commercial properties were high during the past several months, and this was due to an elevated level of distressed property sales, the report noted. Additionally, real estate investment trusts took on more sales in the market during this period. Even with this, there could be a decline in total sales, mainly because of the slow progress of the economy.

The report added that the American market could be affected by investors looking to take advantage of emerging foreign countries, such as those in the Asia Pacific region and Brazil. This is because these areas could have more lucrative deals for top-quality properties, while the US itself is struggling to continue improvements at the same level as earlier in recovery.

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