As published in Scotsman Guide's Commercial Edition, January 2007.
Who do we have to thank for commercial real estate's recent stability, compared to the schizophrenic housing market? Try Pets.com.
Or for that matter Webvan, Kozmo.com and the other tragic figures of the dot-com era -- whose buildup and fall created scads of unused office space. This pushed down construction activity, which pushed down construction employment. Which actually left the commercial market in decent shape.
According to an October 2006 report from the U.S. Bureau of Labor Statistics, nonresidential-construction employment decreased by 6.9 percent between 2001 and the end of 2005. Meanwhile, residential-construction employment -- buoyed by the recent building boom -- increased by 14.7 percent during the same period.
In other words, while the residential sector built and built, the commercial sector's response to the sudden, severe dot-com crash and 2001 recession was to wait for demand to meet supply -- and now, it has come close. Although commercial-construction investment declined for a chunk of that period, the bureau also reported that vacancy rates have declined -- and real spending on retail construction has shown steady growth in the past three years.
Meanwhile, the National Association of Realtors now calls U.S. commercial real estate "fundamentally sound, with growing jobs and expanding businesses," according to comments from senior economist Lawrence Yun at the association's annual conference. Speculative building, an issue in the residential sector, has been held in check by the still-high construction costs.
In this month's Scotsman Guide, we examine these and other issues related to construction and development.
Contintental Environmental Redevelopment Financial's Peter Hollingworth takes us inside the world of brownfields redevelopment in our Lead Article. These sites, designated as hazardous or potentially hazardous, could pose opportunities for patient brokers.
Also in this issue: Reis Inc.'s Sam Chandan explores the overbuilding and vacancy risks in the retail sector, while Lighthouse Commercial Funding's Harlan Friedman shares advice on working with developers.