Real estate industry may have downturn in 2009 too

It is known to us that the real estate scenario along with the overall US national economy was disastrous in 2008 thanks to the worldwide downturn. But, in spite of this, some people remained hopeful that the classy areas of the country known also for their strong foundations would be able to avert the crisis. The appalling reports that are emanating from an assortment of study groups, unfortunately, are dashing their expectations. Take for instance the year-end report by Bloomington-based NorthMarq. It has brought to the fore how the real estate market of Twin Cities also did succumb to the pressure.

According to the report, each and every sector of the Twin Cities commercial real estate market staggered under the weight of the troubled economy and credit markets last year and even the strong foundation of the local economy along with real estate proved to be futile to save it. On the other hand the 2008 Compass Report of the real estate services firm delineates a year in which vacancy rates for retail space jumped to a 10-year high. This is not all since a good number of land values got reduced drastically as well and the rate was not less than 70 percent. The situation was indeed dreadful and the unbearable environment provoked many employers to opt for reductions. The domino effect was that the building owners got panicked and were found to wonder how to fill up office and industrial space.

What can be the situation in 2009? Though many hope that the market will turn around in 2009 after lots of anguishes, the bulk of the observers remain sceptical. On the contrary they term this as a bleak prospect and among them Mike Ohmes, NorthMarq executive vice president, brokerage services, happens to be a proficient exponent of this theory. In the words of Ohmes, “The next year is going to be one where people are hopeful that we find the bottom of the market. If that happens, I believe it won’t be until the end of the year.”

It should be noted that the growing vacant space was not the result of a great increase in the number of buildings. On the contrary the fiscal slump led to reduced activities in the field of real estate and also construction activity. This may be repeated in this year too.