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No clear answers: Questions outweigh optimism at real estate conference
(Commercial Appeal, The (Memphis, TN) Via Acquire Media NewsEdge) Feb. 19--Though not completely unexpected, local commercial real estate professionals got the message Wednesday: Memphis is not immune to hard times.
"As of year end, there is nowhere in the U.S. that isn't in a recession," said Janice Stanton with Cushman & Wakefield, the keynote speaker at the sixth annual Commercial Property Forecast Summit.
The crowd of 300 commercial real estate professionals gathered at the Germantown Performing Arts Centre for the summit, organized by the Memphis Area Association of Realtors Commercial Council, listening closely for an optimistic outlook for 2009, and instead left with more questions than answers.
"People are still waiting to see where we really are," said panelist Larry Jensen with Commercial Advisors. "They're asking: 'Is the stimulus package going to work?' 'Are we going to be able to borrow money to run a business?' There are still big question marks out there that in the consumer or the user or the office tenant's mind that are not answered."
While Stanton presented a national overview of commercial real estate and the economy, the focus of the summit quickly turned to the looming 2009 county property tax reappraisal -- when the property tax rolls are adjusted to reflect fluctuating real estate values -- due for certification on April 20.
"The 2009 reappraisals will be the most challenging reappraisals in Shelby County history," said Andy Raines with Evans & Petree.
Because the reappraisals will be based on data collected over the past three years, property values could be either more or less than expected, and property owners shouldn't be surprised by an increase in tax rates, he said.
Focus then shifted to the state of local office, industrial, retail and multifamily sectors finding no new development as a common denominator.
Office vacancy was up, reaching 16.9 percent at the end of January in the Memphis market partially due to several new deliveries to the East market in 2008.
Industrial buildings also saw a 15.4 percent vacancy with 109.7 million square feet of inventory in the market.
Hewlett-Packard will complete its return of 2.2 million square feet, adding inventory and further securing a favorable market for tenants.
"This year we don't see any new product being delivered, so we expect to see vacancy rates drop," said industrial panelist Jim Mercer with CB Richard Ellis Memphis.
Of all the commercial sectors discussed, retail was expected to be the most distressed, said retail panelist Cary Whitehead with Boyle Investment Co.
Retail vacancy in the Memphis market reached 9.8 percent at the end of 2008, up from 9.1 percent in 2007 and 8.5 percent in 2006.
In 2009, the market can expect to see more retail failures as consumer spending continues to slow and online retailers pick up business, Whitehead said.
"The luxury market has been stressed for the first time since the 1970s," he said.
As unemployment continues to climb -- up 2.1 percent in Shelby County in 2008 from 2007 -- vacancies, rental rates and absorption in all sectors will follow.
"I think that Memphis has softened along with the rest of the country, but probably in a more gentle manner," Stanton said after the summit. "I think on the residential side there is less of a property bubble so there is less to recover from, but I don't think that anyone can escape the fact that you cannot borrow ... and it's going to be difficult to work through restoring liquidity in the system."
Though panelists could not leave attendees with clear predictions of when or if the market will begin to turn in 2009, it was clear to some that raising consumer confidence and creating jobs were going to be key to fixing the economy.
And the action must be taken locally first, said Memphis City Council member Kemp Conrad.
"The main takeaway is real estate is driven by jobs," he said. "One of the things we can fix now is create more jobs, and we have to fix the (payment-in-lieu-of-taxes) program to do that."
To see more of The Commercial Appeal, or to subscribe to the newspaper, go to http://www.commercialappeal.com.
Copyright (c) 2009, The Commercial Appeal, Memphis, Tenn.
Distributed by McClatchy-Tribune Information Services.
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