SoapBlog 3
Dan Neyer
Commercial Building's Economic Outlook for 2009: More Difficult Before it Gets Better, Neyer Predicts
There are a lot of challenges coming up in 2009, the biggest of which is the credit squeeze. The ability to obtain loans is very difficult in today's environment, as many banks are afraid to make mistakes.
There are also many development, or short-term loans coming due in 2009 and 2010 due to increasing vacancies and downward pressure on rental rates, which will require a substantial amount of additional borrower equity at a time borrowers can least afford to provide it. We are very fortunate at our company that we continue to obtain loans due to the strength of our balance sheet.
Construction for private (non-public or non-profit) companies will be virtually non-existent in 2009 due to the lack of credit and the fact that construction costs have not been reduced enough yet to justify new development.
Cincinnati will not suffer as badly as other cities because we're not so dependent on the financial services industry. We have a diversified economy and the strength of P&G, Kroger, General Electric, Western Southern and other companies helping us weather the storm compared to cities such as Dayton and Detroit, which have economies more closely tied to the automotive industry.
I think the recession will last as long as the overall mood of our country is negative and lenders restrict the amount of available capital. This time around, commercial real estate overbuilding in our town is limited compared to other recessions we have had in the past. Compared to other cities, we will not fall as far as others will.
If you look at the past, we've gone into a commercial recession just about every eight to 10 years. These are generally caused by greed by either borrowers or lenders ignoring the basic principals of good, sound real estate investment and getting ahead of their skis.
Cash is King even more today than is has ever been. If you have the cash, you will be able to seize opportunities that come your way.
High growth areas will continue to be infill locations south of I-275 along the I-71 corridor, and the I-75 West Chester and Liberty Township corridor.
During times of stress and uncertainty, companies which have invested and spent wisely will be the winners. I personally believe 2009 and 2010 will be looked upon years from now as one of the greatest times for opportunity and think that businesses need to adjust their thinking and look to the future, not dwell on what occurred in 2008. Those who keep a positive frame of mind will be better for it.