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Experts Make Predictions about Property Management

Stellar Management Needed, Says IREM

A return to normal may be years away in the residential and commercial property management sectors, according to the Institute of Real Estate Management (www.irem.org). Values will continue to drop until capital markets clear and bad debt is taken off lenders" balance sheets. One upside is that opportunities are there to buy properties from owners who are desperate to sell assets to raise cash.

"Because real estate owners and investors can no longer count on leverage and appreciation to deliver the returns they desire, their property management model for investment real estate is returning to the basics,- said IREM President Pamela W. Monroe, CPM.  "The focus during this recession, therefore, is on driving net operating income by minimizing operating expenses.-
 
Outlook Varies By Market

Outlooks are similar from market to market, though specifics vary.  Standing out as most encouraging are the expectations for the Metro Washington DC area, currently viewed as stronger than other markets (likely, perhaps, because government and government-related enterprise is relatively impervious to the national trend toward business contraction). Other markets are more sensitive to major businesses that shape their character, such as St. Louis, where the fortunes of Monsanto, Ford, and Anheuser-Busch ripple significantly through the economy of the area.
 
Retail

Retail in Rhode Island is suffering from declining population and weakening financial conditions as are office, multifamily and industrial properties there. In St. Louis, with unemployment up and accessible home equity dropping, high-end retail (including food) is declining while sales at drug and discount stores are rising as people search for lower prices and stay-at-home entertainment.  Increased vacancies and bankruptcies are driving increased competition for tenants.  Many St. Louis developers have found themselves with build-to-suit properties made for tenants that have gone bankrupt, leaving the developers with retail property unsuitable for general leasing.
           
Minnesota is seeing continuing steep declines in retail, with the negative growth generating the lowest level of confidence among all the major property sectors. 
      
Office

Much the same outlook is seen for office properties as for retail, except in the Washington DC Metro area, which is expected to experience positive absorption.  In Rhode Island, declining income and deteriorating expectations for the future economy hang over this property sector as it does over industrial and multifamily.  Phoenix is expected to see increasing vacancies.  Downtown St. Louis is seeing minimal absorption with some tenants just swapping B for A space and others simply trying to consolidate many locations acquired through mergers.  With a drop in demand and an oversupply of product in St. Louis, asking rates are at the low end of the national scale (i.e. $22.42 psf). Landlord concessions will continue in the St. Louis area, but most deals will be short term, as tenants want to stay put until the market clears.
           
Minnesota presents a similar picture, with office rent growth flat or negative as vacancies increase along with unemployment.

By Michelle Simmons
Get Property Management Jobs, Contributing Editor

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