CRE To Worsen, Then Stabilize in 2009

ATLANTA-The local commercial real estate market has deteriorated significantly over the past 12 to 18 months, and the trajectory is going to continue downwards for at least another two quarters before it begins to stabilize, market reports reveal. Although brokers don’t want to put a time on the expected turnaround, many are hoping for conditions to flatten by midyear, leading to a brighter 2010.

“It’s hard to predict any kind of rebound in the market until the job outlook begins to turn the other way,” Thomas Bogle, principal and managing director of Jones Lang LaSalle in Atlanta, tells GlobeSt.com. With a weak job market, demand for space is weakened and vacancies will be on the rise, which could put downward pressure on rates. “It’s also possible that rates can stay flat without a decrease, but that means competition for tenants will be in front end concessions and tenant allowances,” adds Clark Gore, JLL’s local market director.

With unemployment expected to increase into 2010, and an expected 3.5 million square feet of new product being completed, the office sector is especially poised to take a deeper dive in the first half of this year, according to Cushman & Wakefield. The upside is that not much of the new construction is taking place beyond Buckhead and Midtown, which should allow rents to stabilize, concessions to decrease and positive absorption to occur toward the end of the year, according to Lisa Dunavin, senior director with Cushman & Wakefield’s Atlanta office.