NAR Commercial Real Estate Outlook for August 2012
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The National Association of Realtors sums it up pretty well in the attached August 2012 Commercial Real Estate Outlook when they opine that the economy has gone on vacation. That’s pretty much how I would describe it too. True, the triple net or absolute net, single tenant, national investment grade credit tenant retail is still doing well trading with cap rates in the mid 5s to low 6s in most areas of the country. Multifamily is still hot, but the economy has slowed considerable from fourth quarter 2011.
Uncertainly over the upcoming election is a big part of it in my opinion. I think most of us are rightfully very concerned about Obama in a second term when he cannot run for reelection and absolute petrified of the thought of the democrats winning the House back and holding the senate plus the White House. This is the primary reason I think we’ll just muddle long for the third quarter.
GDP growth has fallen from a revised 4.1% in the 4th quarter of 2011 to 1.5% in Q2 2012. This is not going in the correct direction and growth is about 1/3rd as strong as the recovery from the equally deep 1980 to 1982 recession. We can fix this November 6th, but Intrade puts the odds at about 55 – 45 against. Incumbents rarely lose, thinking only 1980 and 1992 regarding the second half of the 20th century. We need predictability and certainty to make investment for a period of seven years or more and I’ve never seen more uncertain times. You see confirmation of that in the business investment numbers, down from 14.6% in 2012 and 2010 to 5.4% this year.
I think we’ll see multifamily remain strong and the same goes for single tenant, triple net leased or absolute net leased retail at least until there’s far more new construction that what we’ve seen in this ‘recovery’.
