Well, it’s that time of year to reflect on the previous twelve months that passed so quickly and to ponder what’s to come in the New Year. 2010 was definitely better than 2009, with some light appearing at the end of the proverbial tunnel. Many economists are forecasting 2011 to be slightly better than 2010, with the majority of the recovery to take place in 2012. I am still trying to figure out where it’s going to come from, but maybe that will be next month’s topic???
Getting back to this year, many sources speculated that the commercial real estate industry was to be the next “shoe to drop”; however, in Jacksonville, as in may other markets around the country, brokers with whom I have spoken confirm that never happened. The struggling financial industry also figured out how to rework many of the loans that were in foreclosure/default. Companies battled through tough times and are still standing, with many owners now telling me the worst is behind them, and they are stabilizing. Even so, those companies that are once again becoming profitable are not predicting any sizable expansion until 2012 or later. Now, let’s not confuse 2010’s definition of “profitable” with 2006’s definition, because they are worlds apart, but it is nice to hear that word again!
What does 2011 hold for the business world? Probably much of the same as in 2010, with a little more good news sprinkled in - except for the NFL lockout that seems inevitable! I believe in 2011, we will see more companies make a “leap of faith” and expand their businesses and/or go from leasing to owning. I am already speaking with several companies that, because they wanted to wait and see what was going to happen in 2009 and 2010, did a typical short-term, 12-month lease renewal, but are now ready to go to the market and shop the availabilities to purchase a facility. I think we, in the commercial real estate world, will see more companies exploring this option in 2011 than in the past couple years. The investor appetite has been - and continues to be - strong, but all seem to have a similar complaint - they have money to spend but cannot find the quality product they would like to spend it on. Citing a “poor tenant mix” or “outdated building standards”, they chase only 3-5% of the deals that come across their desk. I am not sure if that percentage will change next year, but I do know investors can’t hold on to their cash forever. They are too smart to let it sit in an account collecting minimal interest when it can be working for them through real estate at a much higher rate of return.
As a final note, I will be helping out at the Pine Castle Christmas Party (www.pinecastle.org) this Friday, December 17, 2010, with our Northeast Florida NAIOP group. Last year was a blast, and I expect more of the same this year. I hope everyone has a Merry Christmas and safe travels to wherever you may be going this year and I will be back next year… I hope you will too!
Jacob Horsley
NAI Commercial Jacksonville
Industrial Group
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