Commercial Real Estate Still Faces Challenges

Washington, DC, May 20, 2013 -- Even as the economy picks up and the job market improves, the commercial real estate market faces a number of challenges, according Lawrence Yun, chief economist of the National Association of Realtors.

Speaking at the Commercial Economic Issues & Trends Forum at the 2013 Midyear Legislative Meetings & Trade Expo in Washington, D.C., Yun said the commercial real estate markets had been hurt significantly as a result of the housing crisis.

While wealthier citizens have seen their fortunes improve, many low-income Americans are still treading water and believe the economy is getting worse. The overall market is highly dependent on the entire economy.

Yun said that global investments in commercial real estate had risen by 4% over the last year even as the retail, office and industrial sectors of the U.S. remain largely stagnant--multi-family housing has driven the growth.

Yun also said that the decline of smaller lenders is one of the biggest hurdles for the commercial real estate sector.

Three years ago, smaller lenders controlled about two thirds of deposits, but today the figure has shrunk to around 50%. These lenders, largely regional and community banks, have traditionally been the big financiers of commercial real estate.

Nevertheless, NAR commercial members, who typically handle transactions of $1 million or less, say their sales are starting to improve.

“While the prices for deal sizes most frequently handled by Realtors have not yet stabilized, we have recently seen a positive upturn in sales volume,” said Yun.



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