Economic 'Fogginess' Explored and 2010 Predictions Offered
Globe St. reports: If you feel like you're in a fog about the economy, you're in good company. Uncertainty about the economy is so widespread that USC law professor George Lefcoe declared, "We are about to clear up the uncertainty" when he introduced opening speaker Christopher Thornberg, principal and founder of Beacon Economics, at the opening session of Wednesday’s USC Real Estate Law and Business Forum. Lefcoe said that the conference -- where Thornberg shared the opening session's comments on economics with Robert White, founder and president of New York City-based Real Capital Analytics -- would explore the ‘fogginess’ shrouding the economy and offer predictions on where the recovery is headed.
White, who presented an overview of the property markets, said that he sees mixed messages in the economy, although overall, “There are some positives, at least for now.” He cited a slow uptick in transactions, pointing to Q1 2010 sales numbers, which increased approximately 40% to 50% on a year-over-year basis. And while that sounds hefty, he noted, “You have to remember where we actually are” because those are increases over a 2009 in which sales were extremely low.
For the most part, White said that the outlook for fundamentals remains poor and is expected to stay that way in 2010, but most buyers have already priced that into their thinking about prices. He explained that he is beginning to see property prices bounce a little bit, and is starting to see cap rates come down rapidly. For the most part, however that is for an elite tier of assets. “Investors still place very little value on vacant space or on anything where the value is well into the future,” he said.
White pointed out that equity capital is not the problem. “There is plenty of it out there and some might say there is too much of it," he said. He noted that public capital and foreign investors are very interested in the US right now, that “REITs could end up ruling the world over the next two years.” Equity funds, although they haven’t been active yet, by all reports, have tremendous buying power,” White pointed out.
One factor that is causing a sense of urgency among investors, White said, “is that they have seen the rest of the globe turn very quickly.” He pointed out that Europe and Asia have jumped ahead with the rebound and the US has lagged, “which has scared a lot of our international investors.” White ended his overview with the point that the future is uncertain, “but it depends on what happens with all that distress and the debt markets.”
View the full article on Globe St.: Economic 'Fogginess' Explored and 2010 Predictions Offered
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Posted by: Nina Turner