In lieu of sequestration, commercial real estate managers optimistic

As sequestration begins and the office market surrounding D.C. is impacted, commercial real estate managers and investors remain confident.

Despite sequester cuts causing concentrated, negative economic impacts for certain regions, many commercial real estate professionals are optimistic amid other economic indicators.

According the National Real Estate Investor, the U.S. economy will lose $85 billion in federal budget cuts for 2013 – cuts that won't necessarily be felt evenly. Economists are predicting that such cuts will reduce growth in the gross domestic product by 0.5 to 0.6 percent. Many of the cuts will directly impact the office sector as government contractors constrict their staff size and budgets.

"It will slow us down a little bit," Jon Southard, managing director of the Econometric Advisors at CBRE in Boston. "But it won't be fatal in any sense of the word."

Geographic regions most affected
Washington D.C., Maryland and Virginia all report 19.8 percent of their economic activity relates directly to federal spending, as a high concentration of government agencies and contractors call this region home. 

According to the NREI, 40 percent of the office market in northern Virginia is propped up by government contractors. In 2012, the metro D.C. office market saw 3 million-square-feet of negative absorption as contractors consolidated their operations and the government froze its property acquisitions.

Scott Homa, a vice president of research for the Mid-Atlantic region at Jones Lang LaSalle in Washington, D.C.

"So, this is an office market that is highly exposed to any fluctuations in government spending," Scott Homa, vice president of research for the Mid-Atlantic region at Jones Lang LaSalle, told NREI. "Any lack of clarity associated with fiscal policy and long-term budget priorities really impedes growth in the market."

Optimism to boot
Even though the office sector dragged as a result of the government spending cuts, the long-term outlook is positive. Commercial real estate investors are seeing improvements in business spending, job growth, a housing recovery and boosts in consumer confidence indicating good things to come.

In a recent statement, Bentley Forbes, a real estate investment and development company, expressed their confidence in the market. They noted that it is easy to point to a few storm clouds but people are getting back to work and interest in retail and office space in increasing. And that's not mentioning, the firm notes, the continued success of the multi-family sector, emphasizing that the future looks promising for commercial real estate.

"It is clear that there is an increased level of optimism in this industry," said Bentley Forbes. "Which is good news for all of us,"

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