Carl Cronan is editor of Real Estate Florida, from which this article is excerpted.
ORLANDO-Opportunities for commercial real estate investment remain plentiful in markets that might have been overlooked before, as well as in product types, according to a panel of experts addressing Coldwell Banker Commercial brokers here Tuesday.
The five-member panel covered a variety of topics during the morning session of CBC's Global Commercial Conference at the Gaylord Palms Resort & Convention Center, attended by nearly 700 real estate professionals.
"Capital is going to flow to the opportunities," said Glenn Mueller, real estate investment strategist with Denver-based Dividend Capital Group, adding that a lot of "dry powder" is waiting for the right time to strike.
Secondary and tertiary metropolitan markets across the country, where brokerages such as CBC often have a dominant presence, are likely to be the best places to find deals in all commercial property types, said Kurt Padavano, COO of Advance Realty Group in Bedminster, NJ, and former chairman of the Building Owners and Managers Association (BOMA) International.
Padavano also noted that Wall Street is exercising more discipline when it comes to commercial investment, along with seeking better quality not just in properties but talent pools connected with those markets. "I think the adults are in charge now," he said.
While CBC experienced a decline in its overall number of transactions throughout 2007, their gross aggregate value was up over the year, said Richard W. Davidson, the company's president and COO. "We may not be doing as many, but we're doing better deals," he says.
Davidson also emphasized to CBC affiliates that they should attempt a more collaborative effort during this year's anticipated slowdown, during which rents are expected to flatten or decline while vacancies rise. He advises his brokers to expect falling prices, hold core assets while disposing of lower-quality inventory, and emphasizing "brain power" more than manufacturing in their markets.
Office and industrial sectors are expected to benefit from continued job growth in the technology and telecommunications sectors, according to the panel. Furthermore, energy markets should boost employment in Texas and Colorado.
Multifamily is expected to be the strongest commercial segment in the coming year, with Davidson pointing out that the nation's rental inventory has only about 5% vacancy. However, he warns that an oversupply of housing being turned into temporary rentals by owners could have an adverse impact, particularly in heavier markets like Sarasota, FL.
Although the general public has a greater awareness of commercial real estate through media exposure, such as Davidson's appearance on CNBC's "Squawk Box" earlier this year, panelists said brokers need to emphasize the difference between their sectors and traditional residential real estate.
"There is not one single subprime commercial loan in the United States," Mueller said.
Additional panelists were Alex Perriello, president and CEO of Realogy Real Estate Franchise Group, and Christopher Lee, president and CEO of Los Angeles-based CEL Associates Inc. Michael Desiato, vice president of Real Estate Media, moderated the panel discussion.
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