Commercial Real Estate Boom Not Before Early Next Decade

Sep.25.09 | About: Jones Lang (JLL)

According to a report published by Jones Lang LaSalle Incorporated ((NYSE:JLL)), a leading real estate investment trust (REIT), the U.S. commercial real estate (CRE) market boom is likely to occur early in the next decade at the earliest.

During the second quarter of 2009, CRE sales were $5.2 billion compared to $30.7 billion in the year-earlier quarter and drastically down from $114.7 billion in the second quarter of 2007. In the first half of 2009, CRE sales were $16 billion -- down 80% year over year, and down 93% compared to the first half of 2007. The decline is primarily due to the credit-constrained market, which has virtually shut down avenues like mortgage lending and other loans essential for real estate sales and refinancing.

The credit crunch has widened the bid-ask spread between buyers and sellers of CRE, which has further caused deal volumes to fall dramatically in the past couple of years. Although lending has started to trickle down, it is mostly concentrated to large capitalized players who have better access to the capital markets. Furthermore, continued job losses have plagued the industry as a whole.

In addition, consumer spending continues to drop across the country due to a global economic meltdown. Under such circumstances, Jones Lang predicts that market recovery is likely to occur by mid-2010, although the boom will take a much longer time, almost a decade. Jones Lang is a leading full-service real estate firm that provides corporate, financial, and investment management services.

The company caters to corporations and other real estate owners, users, and investors worldwide. A broad real estate product and service range, and extensive knowledge of domestic and international real estate markets enable it to operate as a single-source provider of real estate solutions.