Colliers Houston's Gottilla

Last week’s GlobeSt.com Quick Poll asked readers if the bailout is already improving CRE’s outlook or if it will take time to help the industry. Michael Gottilla, Colliers Houston & Co.’s director of research in Teaneck, talks to GlobeSt.com about why the bailout was necessary but may not halt falling market prices.

The commercial real estate market existed in a parallel universe for the first phase of the credit crisis. Prices kept rising even after Bear Stearns collapsed. Commercial real estate prices behaved as if they were impervious to the storm battering the global economy. Things had been so good for so long that there certainly appeared to be a great deal of willful neglect on the part of market participants regarding the obvious linkage between commercial real estate and the economy. In September, when Lehman Brothers went bankrupt and AIG was forced to turn to the government in order to survive, the perception of invincibility was shattered.

Those events caused a cessation in lending that was a wake up call for the commercial real estate industry. Commercial real estate market participants could no longer hit the snooze button. Since that time most people in the commercial real estate market have done their best to conceal their apprehension. Regardless, they have come to the realization that they exist in the same universe as everyone else. The bailout has done very little to make that epiphany less worrisome.