Commercial Market Improves Despite Credit Issues

Washington, DC, May 23, 2012 -- National Association of Realtors Chief Economist Lawrence Yun presented a modest and hopeful outlook for the commercial real estate market last week.

“The commercial market has displayed modest growth lately,” said Yun. “Commercial real estate is the basis for much of the growth in the American economy, however challenges continue to exist. Despite this there are hopeful signs that the market might be slowly recovering due to recent job creation and an increase in consumer spending, among other indicators.”

Yun noted that consumer spending has increased slightly, while personal incomes have risen. People also are now able to save money, proving that the savings rate had rebounded. Jobs are also accelerating and the stock market has shown a strong recovery.

“Consumer confidence has yet to return to normal and America still needs to create more jobs,” said Yun. “However, there are signs that show a positive overall financial improvement within the country.”

One major challenge that continues to plague the commercial market is lack of available credit.

While there are notable improvements in capital for large commercial transactions, valued at $2.5 million or higher, there remain significant challenges for small business.

“Since the economic crisis, smaller lenders have been shut out while larger lenders do a majority of the business,” said Yun.

“Realtors have reported that they typically obtain commercial mortgages from smaller banks. They find it frustrating that the larger banks are gaining market share at the expense of smaller sized lenders, which is hampering lending to small businesses.”

All major commercial real estate sectors are seeing improvement, but multifamily housing continues to be the healthiest with falling vacancy rates and rising rents.