Emerging Trends in Real Estate for 2010

PricewaterhouseCoopers recently completed their annual projection for the real estate market in the coming year for the Urban Land Institute (ULI). The publication, entitled Emerging Trends in Real Estate, is now in its 31st year and is the most widely read forecast report in the real estate industry. It provides an outlook on US, Canadian, and Latin American investment and development trends, real estate finance and capital markets, property sectors, metropolitan areas, and other real estate issues.

ULI recently held an event in Philadelphia to unveil the results of this study to their membership and interested organizations within the greater Philadelphia region, which GVF attended. Overall, the study suggests that the commercial real estate industry will hit bottom in 2010, after spending nearly a year in suspended animation lagging the already shattered housing market. Some of the major points from the presentation include:

- The commercial real estate market is expected to be the worst since the Great Depression. Retail and office property owners will take the biggest hits, as consumers rein in spending and companies delay hiring and shave occupancy costs

- Surveys by Emerging Trends indicate that 2010 will be the worst time for investors to sell properties in the report's 30-year history. However, those investors with liquid assets (cash) should be posed to take advantage of highly attractive buying opportunities due to massive government infusions and banks disposing of real estate owned.

- Any real estate resurgence will likely not happen until late 2011 or possibly 2012.

- Developers will go into forced holidays, as new development makes little sense when investors can buy existing real estate at bargain basement prices.

- Apartments should rebound faster than any other part of the residential real estate sector, once hiring increases. Much of this is due to pent up demand from young adults still living with their parents.

- Emerging Trends expects the nation's premier 24-hour gateway cities to weather the ongoing turmoil better and recover more quickly than most interior locations. Washington D.C. is expected to make the quickest recovery, as the federal government has cut the fewest number of jobs in the US, and will be the first to hire new employees.

- Along the I-95 Corridor in the Northeast, Philadelphia is expected to recover the slowest of the major cities (with Washington D.C., New York City, and Boston being the others).

- The reason for this is that Philadelphia is relatively insulated from the national economies fluctuations. Philadelphia never experiences the best of the "good times" or the worst of the "bad times". Philadelphia has not been hit as hard by the national economic slowdown as most other cities of comparable size.