Awaiting the Great Unknown

NEW YORK CITY-When it comes to determining how long the current downturn will last for commercial real estate,”the government has much more control over the outcome than we’ve ever seen before,” said Bruce Mosler, president and CEO of Cushman & Wakefield, at an Urban Land Institute New York panel Wednesday morning. “And that is a scary proposition.”

It wasn’t that Mosler and his fellow “Resetting Investment Strategies” panelists necessarily ruled out the potential long-term effectiveness of the federal government’s trillion-dollar efforts to stabilize and jump-start the economy. Tom Flexner, global head of real estate at Citigroup, noted that Wall Street hasn’t been enthusiastic about the Obama administration’s residential mortgage plan, but called it “absolutely a step in the right direction.” He also gave a vote of confidence to the Treasury Department’s newly launched TALF program, although to date it hasn’t included the commercial sector. However, Flexner said the unprecedented size of the government’s role in shaping the world in which commercial real estate will operate is also the primary source of the current uncertainty about what that world will look like.

Flexner charted two possible outcomes to the federal government’s economic recovery program: it will lead to stabilization and will help the industry find the floor on pricing, or it will help create “a very severe environment” for the long haul. In the near term, he predicted that “we’re going to reach a point of clarity in the market” over the next three to six months.