Our real estate market bottom was 2009.
Although, our bottom was much higher on a relative basis than the rest of the country in that 1) we didn't have the excesses of the rest of the country, particularly in the single family housing market, and, 2) the energy industry helped us. But, we can't escape the effects of a deep national recession no matter how much we'd like to think we are insulated.
Our firm manages and leases about 17 million square feet of space in Oklahoma. In looking at our commission and transaction volume as a guide, we've seen a relatively steady increase in lease transaction business in the last two years, approximately 25 percent in 2010 and about 25 percent again this year. So little activity occurred in 2009, the 2010 improvement was what I'd characterize as 'returning to life' economic activity.
In the retail market, this year we're seeing a return of national retailers to the marketplace, not a flood, but a return. Local retailers are probably hurting more now due to the extended recession. They've already cut back on overhead and expenses and now they are having to live through lower sales/growth.
The office/industrial market has not fallen as far, thanks in large part to the energy industry growth. But, despite the growth in transactions, we've seen rent decline moderately, less than 10 percent, and values decline close to 25 percent.
And, that brings us to the part of the market that remains anemic - property sales.
Very few properties have changed hands the last three years. We attribute that to 1) a continued lack of lending (at terms that make sense to borrowers), 2) the huge amount of uncertainty in the general economy, 3) the lack of attractive re-investment alternatives for sellers; and 4) seller's being unwilling to accept a 25 percent reduction in value despite a relatively constant income stream.
Activity has picked up marginally in the last year to 18 months, but for distressed properties and class A properties only. Our market continues to see a limited amount of distressed properties; the ones we have are typically retail and multi-family. I don't see the sales market picking up significantly in the near term as we see little change in the above factors.
I started out the year very positive about our market, but despite some improvement, it feels like we are crab-walking sideways. I've said this before, but I think improvement will continue over the next couple of years, but it will be in fits and starts, very uneven.
So, when we look back two years from now, we'll see that the real estate market has made significant improvement. But, it probably won't seem like it while we are in the midst of the give and take of it.
