Robin Zellers, SIOR, Jack Shepley, SIOR, James Ross, Justin Shoemaker and Jason Sourbeer all of NAI CIR in Camp Hill, PA attended the 2011 NAI Global Conference in Las Vegas Nevada from February 8 through 11. Zellers, the 2010 NAI Global Member’s Leadership Board Chairman passed the Chairman’s gavel to Kevin Fitzgerald of NAI Southwest Florida. Zellers will remain on the Leadership Board as First Past Chairman.
Over 650 commercial real estate professionals attended the Conference. Dr. Peter Linneman, NAI Global’s Chief Economist and founder of the Wharton Real Estate Department was the featured speaker. The general consensus from both US and international firms represented was the belief that the economic recovery is well underway albeit on a slow, steady, measured pace. The recent news from Business Week that pricing on institutional investments is up 19% over last year also bolstered the optimism. NAI Councils reported that independent investment, industrial, office and retail lease activity are all experiencing steady activity with moderately increased closings across all commercial industrial sectors.
While primary markets on either coast (e.g. – New York, Washington, Los Angeles, San Francisco) are experiencing singular trophy – type Class A investment deals, it is the major and secondary markets (e.g. – Harrisburg, Philadelphia, Lexington, Salt Lake City, etc.) where steady mid market activity is driving optimism.
Within the last 2 weeks, we have taken a number of Central PA vacant commercial land transactions to settlement. The sales included retail land (16 acres), commercial land (14 acres) and industrial land (2 acres and 5 acres). Purchasers included users (retail and industrial) and speculative developers/investors (commercial). While we will absolutely not claim that the land market is back to 2005 – 2007 levels, closing activity is a strong indicator of the settling of values.
Land has always been an investment requiring a stout heart. Generally, successful land investors take a very long-term view of property appreciation. They understand that the real estate market will always cycle and expect that, over time, land values will always increase. Success in this long view requires strong equity positions.
Since 2nd quarter of 2008, Central PA commercial/industrial land sales have been few and far between. Developers, users and investors are now identifying unrecognized value in some of the land on the market (i.e. – properties that are priced right)…and jumping on it. This combination of value recognition and buying confidence is good news for Central PA.
Dr. Peter Linneman, NAI Global’s Chief Economist, just issued the Summer 2010 Linneman Letter. Dr. Linneman, who will be the featured speaker at the Central Pa. Real Estate Symposium in December of this year, is renowned as one of the nation’s leading commercial real estate forecasters. Read a summary of the Linneman Letter here: http://www.naicir.com/portals/36/docs/pubdownload.pdf
For real estate recovery, Linneman says, it’s all about the economy….namely job growth. Recovery without job growth just doesn’t fill buildings. So, what can we expect here in Central PA? Over time, job growth (and job retention) in Central PA runs a bit ahead of national averages. Linneman projects steady job growth through 2013 at which time he suspects we will have balanced job losses since 2008.
For Harrisburg and Central PA, that seems to project ongoing job growth and further stabilization for the next 2 years. This means increasingly strong activity in our commercial real estate markets. Anecdotally, within the last 8 weeks at NAI CIR, we are seeing a greater number of transactions closing – both on the leasing and sales fronts. We believe the paralysis is over. Values appear to be adjusting, buyers are actively closing and tenants are moving. In Central PA, commercial real estate deals are getting done.