What a year 2008 was! From good times to bad times, the business environment has been a roller coaster ride. The business forecasts for 2009 point to more turbulence times, which will signal a shift in the commercial real estate market. Commercial real estate has historically lagged by about nine months as an indicator of economic activity because job layoffs lead to restructuring the use of space and ultimately disposition (by sublet, lease expiration, or sale). When the business environment improves and people are hired the empty spaces and sublet space get filled before companies expand. Due to this lag, vacancies in some real estate markets actually declined in 2008 versus 2007. The trend began reversing in the 4th quarter of 2008. Many people believe that every market will experience a rise in vacancy rates by Q4 2009. Vacancy could reach increase significantly as new buildings currently under construction open for occupancy in 2009 and 2010. This could lead to an additional correction from today`s rental levels by late 2009 before stabilizing. Assuming that the economic consensus is correct, some advisers believe that an upturn in commercial real estate activity is not likely before mid-2010. 2009 to mid-2010 may be a period of opportunity for you to look at your real estate needs. Many can benefit by taking advantage of falling rates and better space options to make their real estate more cost effective and efficient.
Tough economic times can serve as a catalyst to innovative business strategy. This creates opportunities for you, as an entrepreneurial manager, to lead your market. Your premises and your lease can be an asset. Companies who profit most from market opportunities do not wait until their lease expires but evaluate continuously as conditions change.