One More 2010 Look Back and 2011 Outlook Blog Post

Last week, CoStar Group posted a lengthy article about CRE industry professionals looking back to 2010 and forward to 2011. You can read the whole article, titled “Anyone Sorry To See 2010 Go? Hell No!,” here.

In reading the piece, I was presently surprised that it wasn’t simply a rehashing of the red giant of a year 2010, but rather a semi-statistical, optimistic look at 2011.

According to CoStar, this time last year the CRE industry was mostly reading doom-and-gloom articles about the upcoming 12 months. This year, we seem more interested in “half-full” assessments.

The stories getting the most reads in January and February 2010 were markedly downbeat.

  • Betting on Bad Debt Becoming a Growing Investment Play
  • CRE in 2010: Weak Fundamentals and Constrained Liquidity
  • Risky CRE Lending Deadly for Banks
  • Movie Gallery Files Bankruptcy, Closing 800+ Stores
  • Capital Market Recovery Will Take Time
  • Distressed CRE Assets Jump 15% at Nation’s Banks
  • Shopping Center Receiverships and Foreclosures Usher in New Year

The stories getting the most reads in last two months were more longingly hopeful.

  • Have Commercial Real Estate Prices Bottomed Out?
  • Has the CMBS Market Finally Turned the Recessionary Corner?
  • Google Acquires One of NYC’s Largest Buildings for $1.8B
  • REIT Execs Hail Rally
  • U.S. Multifamily Market Strengthens in Third Quarter on Rising Demand, Falling Vacancy
  • Falling Retail Rents Mean More Store Openings
  • Surge in Growth at Apple Prompts 100-Acre Cupertino Acquisition

The article also includes 2011 CRE outlooks that were sent in by CoStar readers. The most interesting of which for Nashville may be the assessment of office and industrial vacancies.

Office, Industrial Vacancies Near Peaks

The U.S. office market vacancy rate is expected to slowly decline over the next two years, falling to 16.4% by the end of 2011 and to 15.3% by the end of 2012, according to analysis from CBRE Econometric Advisors (CBRE-EA). CBRE-EA forecasts that the office vacancy rate will peak in second quarter of this year at 16.8%, up from the 16.6% level at third quarter.

“The recent increase in leasing is a step in the right direction but activity is uneven across markets and generally tenant footprints are not increasing,” said Arthur Jones, senior economist of CBRE-EA. “Since office space is the ‘economy in a box,’ continued job growth is key to the market’s ongoing recovery.”

The U.S. industrial real estate sector’s national availability rate is expected to fall to 13.1% in 2011, down from 14.% in the third quarter of 2010, according to CBRE-EA, which forecasts that the industrial availability rate is expected to continue declining during 2012, ending the year at 11.8%. The national industrial availability rate peaked at 14.1% in the second quarter of 2010.

With Nashville’s office vacancies down to 13.2% at the end of 2010, and industrial vacancies up to 11.7%, it’s good that we’ve beat national averages on both fronts, but we need to continue to whittle away at office vacancies and get industrial vacancies under control in 2011.

Am I sorry to see 2010 go? A little bit. It’s been a year that went better than expected, witnessing the HealthSpring expansion and groundbreaking and the “flagpole property” deal.

But, I too am cautiously optimistic about 2011. Here’s to breaking expectations two years in a row.

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