Welcome to 2011! It took a bit to get here, but I think we are all pleased to be here. It is the year of no elections, the year of positive outlooks, and the Year of The Rabbit. What does it have in store for commercial real estate? We begin our look ahead by looking back at what we have done this year. One of the key indicators on how much commercial real estate we need is employment. In late 2009 New Hampshire was faced with an unemployment rate of close to 7%, today we are almost a point and a half lower at 5.5% (http://www.bls.gov/; http://www.nh.gov/). In discussions with staffers and employers, job growth, a far better indicator, is slow. While a few New Hampshire firms are growing, most growth is done with a few part timers here, or a full timer there. Signs are positive that there is growth however there can never be enough positive stories and antidotes about large scale hiring.
Residential real estate is a bit of a loose benchmark, but historically the rise and fall of commercial is preceded by residential by 12-24 months. In 2010 New Hampshire saw the number of home sales grow by over 30%, off the trough of 2009. In addition the average home price rose by 5% (Real Living The Norwood Group). If history is an indicator, with a better unemployment outlook and home sales, this should mean that commercial real estate will be on the rise in 2011.
Indicators do not always come via statistics. As mentioned before election year is over! Judging by the 24 hour news cycle the 2012 election may as well be tomorrow. Regardless of who won or lost last November, knowing the outcome of the election means the world to investors and users of commercial real estate. Business decisions are based on certainty and knowing that the lame duck session is over was a big step to positive growth. Closer to home there lurks a problem. The looming budget deficient in Concord is presenting itself as a potential key issue for real estate. Leaving off the speculation on how much the shortfall may be, it is sure enough to say the impact may be widespread. Cuts in services? Increase of real estate taxes? These are the “in your face” variety of possibilities. However, what about softer ones like a change in the fees required by your town for development? What about rulings that affect your taxes that are not passed through legislative review first? (it has happened before with 1031 exchange issues). All in all the political view for commercial real estate is a push, too many clouds to see through in this crystal ball.
The final, and possibly the most important, is the gut feel. This indicator is often right with an equal chance of being wrong! However, in talking with members of our commercial real estate team the feelings are good. More people looking at property, more people discussing moving or growing, this means more business. Key result areas to look at this coming year will be energy improvements to the building envelope, as the energy prices rose 6.6% (http://www.bls.gov/). In addition, land development may come back as investment in infrastructure has created new corridors for growth. Lastly, rate lock downs will remain for the rest of the year. Rate could mean interest, lease or basis, but locking in today’s rates will be important moving forward.
In the end I will not be able to tell you what 2011 has to offer until 2012, but until then be confident but be watchful. While there are forces outside of our control that we must watch to measure the impact, the indicators are positive that we are seeing growth both objectively and subjectively.
To contact NAI Norwood Group visit our website at http://www.nainorwoodgroup.com/ or contact one of our offices: 116 South River Road, Bedford, NH 03110 (603) 668-7000 or 100 Market Street #200, Portsmouth, NH 03801 (603) 431-3001.
