Local Market Will Get Worse Before it Gets Better

BOSTON-This area’s commercial real estate market is going to get worse before it gets better, according to David Wyss the chief economist for Standard & Poor’s Corp. in New York City. Speaking just prior to taking part in this week’s fall professional conference of the Society of Industrial and Office Realtors taking place in this city, Wyss notes that the country is clearly in a recession and the only questions now are how long will it last and how deep will it be.

As to the recession’s impact on Boston’s real estate market, Wyss tells GlobeSt.com that while this area does not have a lot of space for new construction, there still is “a lot of empty space” here. “You have a lot of high-tech companies that are going out of business or took space because they thought they would expand,” he says. “A lot of people are backing out of space. Its milder than 1988 but its still a problem.” Wyss adds that he doesn’t expect the turnaround to happen here until next year. Fortunately, he notes, the area’s financial industry has been holding its own, but it’s the tech industry that really caused the quick downturn here. “The tech businesses were the first ones to be hit and they are going to be the last ones to get out,” says Wyss.

Across the country, Wyss notes that there is a lot of uncertainty these days–especially around consumer and business confidence–but he adds that there are some encouraging signs. Chief among those are the cuts in interest rates, the tax cuts and the increase in defense and security spending. “This could be a minor blip,” he says at the briefing, “but this is a recession and we haven’t seen one in 10 years, so it will look bad to the average American.” Dr. James F. Smith, an economist at the University of North Carolina, who also spoke at the briefing, adds that another major stimulus to the commercial real estate markets could be the change Congress is currently considering that would allow properties funded with debt to be refinanced. “That can be a boom,” he notes.