Economist finds good news about commercial real estate by looking back

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News from the commercial real estate front has been so grim for so long that economist Robert Bach at brokerage Grubb & Ellis has taken to writing a short e-mail feature called Good News Friday in an effort to buck up people’s spirits.

He often has to dig deep for upbeat assessments, and today’s column started off with a typical gloomy caveat:

‘For commercial real estate, perhaps the last industry to join the recovery, recent news hasn’t been so good,’ Bach said. ‘Both the investment and leasing markets appear to be stuck in molasses.’

Bach was able to tease out some ‘good news’ by looking backward.

In the early 1990s, he said, commercial real estate had been badly overbuilt and was viewed by many as a nearly permanently damaged asset class. No new building would be needed until after the millennium, pundits said, but even then demand would be slight because advances in technology, such as computers and cellphones, would reduce the need to work in offices or shop in stores.

Those assessments turned out to be overly pessimistic, and most markets were recovering by the mid-1990s. Things weren’t as bad as they looked.

Nowadays, commercial real estate is expected to begin recovering within a year and be strong by 2011 or 2012. ‘For evidence of this relative optimism, look no further than the growing reservoir of capital being raised to target distressed assets,’ Bach said.

So be of good cheer. The sharks are circling.

-- Roger Vincent