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First Quarter 2012


Weak Recovery Continues, with Market Activity Strong Only in Gateway Cities

In our January 2012 North America Market Overview, Cresa noted that the prognosis for the commercial real estate markets in 2012 was somewhat brighter than it had been in 2011, but that active markets will be confined to a few "gateway cities" such as San Francisco, Boston, Seattle, New York, and Los Angeles, as well as energy-related markets such .as Houston, Denver, and Calgary, with most other markets still hampered by excess supply and slow job growth. Nothing has happened in the first quarter of 2012 to change our predictions for the year.

Employment rose by 243,000 in January, 227,000 in February, and 120,000 in March, but the unemployment rate remained relatively unchanged at 8.2 percent, as a similar number of people returned to the workforce. Employment rose in professional and businesses services, health care and social assistance, leisure and hospitality, manufacturing, and mining.

Vacancy Rate Chart
While business conditions have improved over the past year, the pace of the recovery has been quite slow. Over the past few months, it appears that spending, production, and job market activity have improved slightly; which should result in modest economic growth this year. However, with the unemployment rate still high at 8.3%, the labor market can't be considered to be recovering as quickly or strongly as in previous economic cycles.

Other signs of a slowly improving economy are that manufacturing production has increased 15 percent since its lowest point during the recent recession, and capital spending by businesses has expanded substantially over the past two years, driven in part by the need to replace aging equipment and software. Credit availability is increasing, and is now available at historically low interest rates. Although many smaller businesses continue to find it difficult to obtain credit, credit conditions have begun to improve modestly for those firms as well.


Opportunities for Tenants

For tenants in the market, there are still plenty of options at attractive rates and terms, although the availability of prime space in the "gateway markets" is evaporating quickly. Downtown districts are leasing up more quickly than suburban markets, and with little new construction planned for 2012, expect to see rents rise modestly toward the end of the year. Rents have risen already in hot technology markets like Silicon Valley and Cambridge, Massachusetts where space is at a premium as tech companies continue to expand and take space designed to attract top talent from MIT and Stanford.

Thus, with little economic change in the first quarter, we stand by our predictions for modest growth in the private sector, and little expansion in demand for space because of sluggish job growth and continued interest by companies to better utilize technology and alternative workplace strategies to reduce their space needs.

Note about Cresa

With more than 55 offices and $210 M in annual revenue, we are the largest tenant representation firm in North America. Through our alliance with Savills, we cover more than 255 locations in 40 countries. We hope you experience the difference when working with Cresa. We are the real estate firm that cares enough to listen and give you the Tenant's Advantage.

For more details on market conditions and how you can maximize your real estate options, contact your local Cresa advisor or email thetenantsadvantage@cresa.com.

Bill Goade
Chief Executive Officer
Cresa

Our Core Values

Integrity. We are guided by the concept "Do the Right Thing" both internally and externally. We always do what is right for the client's best interest and put our client's interests before our own. We treat our clients and employees with respect, dignity, and fairness in all matters. We provide a professional working environment with competitive compensation for all employees. Character matters and all employees are expected to endorse and live up to our Ethics Statement. All employees must value our professional reputation.

Partnership. We are all in this together. We will cultivate the culture of an enjoyable work experience for all. We will learn from one another; we will cooperate and collaborate with one another; we will foster a fraternity of interdependence. We will encourage inclusive equity sharing structures and/or profit sharing plans in all offices. Charitable giving is encouraged as a goal and benefit of profitability in our communities.

Entrepreneurship. We strive to live "Outside the Box." We maintain a culture of creativity and innovative thinking, where leaders are welcome to thrive. We empower employees to quickly adapt to circumstances, encouraging flexibility and new ideas. We reward employees for saving money or enhancing revenues, for our clients and our firm. We Listen. We listen to our clients needs and use our experience to match their needs with a real estate solution.