LOS ANGELES — The commercial- property market is coming off its worst year in decades, and the woes are expected to deepen before a turnaround takes hold.
Experts anticipate vacancies for office, industrial, retail and apartment properties will continue to rise. Rental rates are expected to fall. And prices, already down 40 percent from the peak of the market in 2007, are projected to decline even further.
That means many commercial landlords will struggle to keep their properties leased, and tenants will have the upper hand.
“For tenants that need space, this is the time,” said Bob Bach, chief economist for Grubb & Ellis. “They’ll have a great choice of options, and in some cases, they’ll have options in buildings they could not have afforded or that were simply not available to them when the market was stronger.”
Commercial real estate vacancies soared last year as unemployment worsened and businesses and consumers reined in spending. The global financial crisis dealt another crippling blow, choking off owners’ ability to refinance burdensome debt and hampering sales.
By the end of the year, the economy had regained its footing, and credit markets began to thaw.
Still, the prospects of a comeback hinge on the fragile U.S. economic recovery staying on track and a meaningful decline in unemployment — something that few economists expect will happen before next year.
