If one follows the daily headlines regarding economic data, one might start to feel optimistic that our economy is on the mend. First quarter GDP rose 3.2%, marking three straight quarters of expansion. So we are technically out of recession. This is great news and after two turbulent years, any good news is welcome. But at this point, it is difficult to see tangible improvement on the ground in the commercial real estate market.
The prevailing opinion on the street is that the economy has bottomed out for the most part and is on a slow accent towards an improved market. It is widely agreed that financing, or lack thereof, is a primary impediment to closing deals. GDP numbers notwithstanding, new and expanding businesses are reliant upon available financing. However, lenders remain tight fisted and loan financing requirements are rigid. Until the capital pipeline is open and flowing again, deal flow will continue to stagnate.
Because consumer spending is such a large part of our economy, cash and credit are critically important. Employment numbers were positive in March and that is more good news, if only for psychological reasons. Half a dozen quarters ago employers were shedding employees by the hundreds of thousands. People have to have jobs to spend money and further drive the economy, but unemployment near 10% will continue to hamper economic expansion. When the private sector is adding jobs by the hundreds of thousands each month, the market should too start gaining some genuine traction.
Recent positive economic data inspire hope for future improvement in market conditions, but the actual circumstances on the ground today indicate the environment is a long way from robust. Financing and unemployment are not the only factors, but hiring and available finance would surely improve the commercial real estate market.
