CORFAC survey findings predict market upturn in 2003

Real Estate Weekly, April 16, 2003

An improved economy in 2003 has been forecast by nearly three-quarters of commercial real estate firms polled in 50 key North American markets by Corporate Facility Advisors, CORFAC International.

At its annual conference held recently in Houston, Texas, CORFAC International announced the results of its semi-annual national market forecast survey, demonstrating strong support for an economic turn-around by the end of this year.

CORFAC also reported that its in depth polling among CORFAC members in the United States and Canada projected that the industrial sector would continue to lead commercial real estate's recovery.

Robert Porter, Jr., president of CORFAC International, commented, "Our market analysis reveals that in the eyes of our professionals in the commercial real estate industry the cup is half full and half empty in 2003. While the consensus is that the overall industry will eventually rebound in 2003, the recovery will be slow and tempered.

At CORFAC International, our strategy remains focused on providing our clients with the tools to prosper in challenging economic times. We view 2003 as an excellent time to be a tenant and predict that as more and more tenants recognize the inherent market advantages that presently exist, the stronger and faster the overall recovery will be."

Half of respondents of the CORFAC International survey felt that business within the commercial real estate industry would experience moderate growth in 2003, with another 40% believing that the level of business will remain at the same level as 2002. The remaining 10% felt that business would either worsen or experience substantial growth within the course of a year. However, the majority of respondents (72.5%) felt that the economy overall would improve in 2003, with only 10% under the impression that the economy would suffer more and the remaining believing that the economy will remain stagnant. When asked about the timing of a possible recovery, most respondents felt it would start to take shape during the 3rd (35%) or 4th (45%) quarters of 2003. 10% felt that it would start earlier in the 1st or 2nd quarters, while 10% believed that a recovery will not begin until 2004.

According to the survey, the main obstacles to a market recovery are the lack of employment growth (40%), political factors such as war (25%), and oversupply of sublet space on the market (20%). 15% believed that other factors, such as economic uncertainty, competition from foreign markets, and negative absorption hindered recovery. Once a recovery is underway, 40% felt that the industrial sector would be the forerunner.

Following industrial, the order of market recovery was in the retail sector (22.5%) and office sector (17.5%). 20% believed that either the multi-family sector or combination of sectors across the board would lead the way. The general consensus was that in all sectors the investment sales market will remain strong in 2003.

Currently, 27.5% of respondents feel that the pharmaceutical/biotech/life science industry is the most growth oriented in their local market.

However, another 25% stated that other industries such as distribution, government-based/defense-related, automotive, and legal show the most growth. Financial services (17.5%), business services (12.5%), and hightech sectors followed. However, 10% claim that they see no growing industries in their respective marketplaces.

By far the majority of respondents believed that there will be no movement in either rental rates (65%) or vacancy rates (52.5%) in 2003. 30% believed that rental rates would fall and only 5% felt that they would increase. It was felt by 37.5% of respondents that the overall market vacancy rate would decrease, while 10% felt that it would increase.

When asked how their respective firms are positioning themselves for growth, a major trend towards increased recruitment and staff training was revealed. Additional firms discussed the importance of maintaining quality, personal relationships with current customers, as well as the aggressive pursuit of new business opportunities and assignments. Several firms mentioned a renewed focus on technology initiatives and the revamping of marketing efforts.