The National Association of Realtors (NAR) held their 2010 Conference & Expo in New Orleans this month, coined "NARdiGras 2010: A Fountain of Inspiration" with 125 education sessions and insights from business leaders. NAR's Chief Economist Lawrence Yun and Hugh Kelly, clinical professor of real estate at New York University Schack Institute of Real Estate, shared their predictions surrounding the commercial market and indicated a slight improvement in commercial lending.
"Banks' profits have returned to healthy levels. As a result, it is inevitable they will return to the business they were created for, which is lending," said Yun. "Commercial real estate has experienced a sharp price correction, but there is still a shortage of buyers because of lack of adequate capital resources." Yun said with imports and exports in the U.S. rising, the demand for industrial space will improve. His commercial forecast shows steady improvement in the market with rents stabilizing and net absorption slowly improving. Yun also predicts a moderate GDP expansion of 2 percent to 2.5 percent in the next two years and an unemployment rate of eight percent in 2012 and six percent in 2015.
Kelly pointed out that most commercial mortgages have been random and idiosyncratic, stressing that the lending environment should not remain that way. "The banks are in the driver's seat, meaning they can cherry-pick deals and there is no stigma to turning away business," said Kelly. "The capital flow in the commercial real estate market has been very selective. To achieve full recovery, lending practices must improve."
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