Always Look On the Bright Side of Life

So it appears that commercial real estate isn’t going to escape the imploding economy after all. (H/T: Peter Pays Paul) This is probably not the best time for NAR to be talking up commercial real estate. But that’s another story, for another time.

This is the time to look on the bright side of the coming CRE bust.

As Calculated Risk points out (quoting Reuters):

U.S. office vacancy rose to 13.6 percent, up 0.5 percentage points from the second quarter, its largest one-quarter jump since the second quarter of 2002. The third-quarter vacancy rate was the highest since the second quarter of 2006 and was 110 percentage points higher than its recent low of 12.5 percent set in the third quarter of 2007.

And as we all have heard, U.S. unemployment has hit 6.7%. While that’s pretty good compared to places like, say, France (7.7%) or Germany (9.1%), it is a 15-year high for the United States.

So uh… just where the heck is the good news in all this?

There has not been a better time to start a company in the past decade.

Think about it.

Unemployment is relatively high, which means labor costs will be lower, and you can find some really talented people at very attractive cost.

Commercial real estate is getting hammered, with higher vacancies and delinquencies and the like, which means that you can probably drive rents to historic lows as well if you’re looking for office space, or retail space for your new concept.

If you’re an investor, and you’ve got cash (or rock-solid credit able to overcome higher lending standards), you probably can pick up some incredible deals on commercial properties. Sure, maybe wait it out some more, wait for more landlords to get truly desperate, but… I suspect that the whole fear-driven atmosphere will make it pretty sweet for those who keep their wits about them and have cash to back it up.

So, in the immortal words of Monty Python,

If life seems jolly rotten
There’s something you’ve forgotten
And that’s to laugh and smile and dance and sing.
When you’re feeling in the dumps
Don’t be silly chumps
Just purse your lips and whistle – that’s the thing.


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Rob Hahn

Managing Partner of 7DS Associates, and the grand poobah of this here blog. Once called "a revolutionary in a really nice suit", people often wonder what I do for a living because I have the temerity to not talk about my clients and my work for clients. Suffice to say that I do strategy work for some of the largest organizations and companies in real estate, as well as some of the smallest startups and agent teams, but usually only on projects that interest me with big implications for reforming this wonderful, crazy, lovable yet frustrating real estate industry of ours.

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