What Does 2007 Hold For Commercial Real Estate?

It’s that time of the year when the real estate community is busy wrapping up loose ends, dotting the I’s and crossing the T’s in an effort to get those last deals finalized and closed before year end.

As we move to the close of 2006 it behooves us to reflect on the factors that have influenced the real estate market so that we may make an educated forecast about the challenges and opportunities that will present themselves in 2007 and beyond.

Capital Influence?

As Meyers St. George , Director of Acquisitions at Fickling & Company, points out in his Financial Perspective article in this newsletter issue, if 2006 was a year of “nosebleed pricing levels” because of the volume of capital continuing to pour into the real estate market then expect 2007 to be a slower pace of capital but not to the detriment of returns. Capital will still be plentiful for the Class A properties in the strong markets but investors will expect managers to increase property revenues and do a better job of controlling expenses to ensure the expected returns.  As Myers puts it “operating performance will once again be the main focus of investors in 2007.”

Development Influence?

The strong appetite for investment real estate over the past few years has increased the numbers of developers in the market and therefore the number of new developments. Going forward developers are facing challenges presented by the rapidly increasing prices for steel, concrete, sheet rock and other building materials. Bobby Cleveland, Vice President of Development at Fickling & Company, speaks to these issues in his Commercial Development article in this newsletter issue; he sees the pricing and competition as his biggest challenge.

Property Sector?

According to the publication, Emerging Trends in Real Estate, the 2007 real estate market will provide the best returns in the multi-family and warehouse sectors. In his article about the Multi-Family Market in this newsletter issue, Larry Drinkard, Sales and Leasing Expert, says that the downturn single family market has made 2006 the strongest multi-family year in the past few years. Look for that to continue.

Larry Crumbley, Sales and Leasing Expert at Fickling & Company, expects the 2007 year to be an “encouraging” year. Middle Georgia should benefit due to the rise in traffic at the Savannah port. Savannah should continue to see sustained growth because of the “Asian overflow” in West Coast ports.

Whatever the challenges or opportunities, 2007 should prove to be another exciting and eventful year in Commercial Real Estate.  Hopefully, you have the opportunity to attend Fickling & Compnay’s Year End Review and Forecast Breakfast and take the opportunity to visit with our real estate professionals. We close 2006 wishing you and your family a wonderful Holiday Season!!

 

Rick DeLisle
Senior VP, Commercial Division
Macon Commercial Office
478-746-9421