Commercial real estate may be last to recover

Commercial real estate may be last to recover
Jack Maher Date last updated: 1/7/2010 10:43:07 AM

DENVER - The newest metro Denver economic snapshot indicates a very slow recovery for the area's commercial real estate sector.

The chief economist for the Metro Denver Economic Development Corporation sifted through the findings on 9NEWS 6 a.m.

Patty Silverstein says the downturn in residential real estate in many ways led the nation into recession, and commercial real estate will be one of the last sectors to return.

According to Silverstein, dysfunctional credit markets and reduced demand for office space drove higher vacancy rates and lower lease rates in 2009, and several major brokerages expect rates will not recover to pre-recession levels for several years.

Silverstein believes commercial construction which slowed in 2009 in metro Denver will remain sluggish.

"Financing for construction projects is the real wild card here," she said. "The money is out there, it's just a matter of where and when it will be spent."

According to CoStar Realty Information, Inc., the total square footage of metro Denver office property completed in 2009 fell nearly 30 percent from the total finished in 2008, and the total volume of industrial property completed was less than one-tenth of the square footage completed in the prior year.

The battered retail market accounted for a majority of commercial construction in metro Denver in 2009, but the market's total annual construction volume fell roughly 42 percent from the volume completed in 2008.

Data from CoStar also shows the direct vacancy rate in metro Denver's office market declined slightly between the third and fourth quarters, but the fourth quarter rate (13.8 percent) was nearly one percentage point above one year ago. Direct office market lease rates fell from $20.73 in the third quarter of 2009 to $20.10 in the fourth quarter.

Silverstein says while the situation is difficult for builders, brokers, and many others who depend on commercial real estate activity, the slowdown in commercial construction should help metro Denver's markets recover faster than metro markets with a larger inventory of new property.

For more on the report please visit:
http://www.metrodenver.org/