This article was written by Catherine Davies-Nelson, a student in the UST MS degree in Real Estate.
Early January, Integra Realty Resource (Integra) served as a co-sponsor of the 2012 Real Estate Outlook.
At the event, Integra presented their comprehensive data detailing market conditions and forecasts as presented in the organization’s outlook Viewpoint 2012. The panelists, who consisted of local and national experts in the areas of office, retail, multi-family and industrial real estate, discussed Integra’s findings and issues surrounding each of the 4 commercial sectors.
As depicted on the graph below, the CRE cycle as presented by Integra has 4 main cycles/phases termed Recovery, Expansion, Hypersupply, and Recession. There are 3 stages (Stages 1, 2, and 3) with each market phase. The 1st stage indicates the entry of the new phase, and the 3rd stage indicating the near exit of the phase.
Last October, Dr. Anthony Downs provided the keynote address at the first annual Minnesota Real Estate Hall of Fame induction ceremony. His address, Why real estate has become a drag on the US economy was a realistic, unvarnished assessment of the issues that our country was facing at the time. He noted that in previous recessions, real estate had often led the way to recovery. Today, however, real estate is a serious drag on our economy’s ability to return to prosperity.
Dr. Downs will return to the University of St. Thomas on October 26 to present the keynote address, “2012 Real Estate Market Update” for the second annual Minnesota Real Estate Hall of Fame induction ceremony. In preparation for this event, I looked back at his presentation from last fall and was surprised by how relevant his address remains today. I thought it would be interesting to revisit his remarks to see how they compare to actual events in the last year.
Most of the key issues that Dr. Downs mentioned last year are still with us today and many of his predictions have come to pass in the ensuing year. Here are several examples:
Unemployment. Dr. Downs observed “high rates of employment are likely to continue for several more years”. He mentioned consumers will not have the cash to increase spending and small businesses will have little reason to hire more. Related to employment he foresaw “no sudden change in conditions is likely to radically increase the demand for new workers and for new production”. Looking at the national employment rate that has been hovering at just over 9% and the Minnesota rate that has been over 7% since last fall with little prospect of near term improvement, his observations seem to be right on. Continue Reading