Recovery may take longer than expected.Speaking at the Counselors of Real Estate meeting on March 20, Tom Parks, director of real estate research for TIAA-CREF TIAA-CREF Teachers Insurance and Annuity Association - College Retirement Equities Fund , said that the industry's recovery from the recent recession might be more difficult and take a longer time than initially expected. Although last week Federal Reserve chairman Alan Greenspan Alan Greenspan Dr. Greenspan is Chairman of the Board of Governors of the Federal Reserve System. Dr. Greenspan also serves as Chairman of the Federal Open Market Committee (FOMC), the Fed's principal monetary policymaking body. announced that the country is officially out of a recession, it will be a while before both the demand and the prices for commercial space achieve pre-2002 levels, according to according to prep. 1. As stated or indicated by; on the authority of: according to historians. 2. In keeping with: according to instructions. 3. Parks. "A lot of economic indicators Economic indicators The key statistics of the economy that reveal the direction the economy is heading in; for example, the unemployment rate and the inflation rate. are announcing recovery,, Parks noted. "But, according to our research, only about 25% of corporate CEOs share this belief. We don't know Don't know (DK, DKed) "Don't know the trade." A Street expression used whenever one party lacks knowledge of a trade or receives conflicting instructions from the other party. how much the real estate business will actually pick up. The office market still has a sizable amount of sublease sublease n. the lease of all or a portion of premises by a tenant who has leased the premises from the owner. A sublease may be prohibited by the original lease, or require written permission from the owner. space and corporate profits are also depressed." According to Parks, a lot of current market problems were caused by the emergence of new economy and the high-tech boom that created a remarkably high demand for office space back in 1999 and 2000. "In some respects, the new economy was a positive development," he said. "The productivity rates kept rising and pushed the unemployment rate down. But there was also a seemlier side to the new economy, because the capital flow was used to finance edge companies (risky ventures that would not be financed in a normal economy) under the assumption that the new economy was stable. The edge companies became the edge economy tenants. The new economy also encouraged mergers, acquisitions, and consolidations that created sublet sub·let tr.v. sub·let, sub·let·ting, sub·lets 1. To rent (property one holds by lease) to another. 2. To subcontract (work). n. space." In general, Parks noted that he is pretty pessimistic about the real estate market in the short-term, since sublease space still abounds and buyers are pickier about asset value and placement value of available properties. But he hopes that some changes in the perception of real estate as a business will help the industry in the long run. "What is different today from the last down cycle in the 1990s is the perception of real estate," he said. "It's viewed as a safe, stable alternative to the bond market." |
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