Despite the slump in the economy, it sounds like the Association of University Real Estate Officials (AUREO) annual conference in San Francisco this September will be well attended. At the conference, I'll be moderating a roundtable about "Commercial Lease Considerations in Today's Market."
I expect it will be an engaging discussion. Although my roundtable description leaned toward the more ominous trends, such as commercial foreclosures and restructuring leases, the news is never as bad (or as good!) as the reports make it out to be. My prediction for the roundtable is that most real estate markets surrounding universities will have remained stable or increased in rents slightly, despite the doom and gloom of their local markets.
My theory is based on three primary ideas: stalled commercial development, a temporary uptick in enrollment, and reduced appetite by legislatures to take on more debt for construction. Specifically, the nationwide markets for new commercial product has continued to stagnate. It's very unlikely any new product will be built soon, so new commercial square footage will continue to be limited. Secondarily, it seems that the recession has caused an uptick in enrollment among many colleges and universities that may translate into a temporary need for new program space. Except for some programs with long-term funding streams, capital for the construction of owned space will be limited, leaving commercial leasing the most feasible option. A further trend that bears watching is how legislatures deal with political trends against taking on more debt, even though extraordinarily low bond rates make it a perfect time to finance for capital projects. New debt service on bonds may be a bridge too far, so the trend line will continue with universities contrained from new bonds or borrowing, despite the extremely attractive cost of capital and lowered cost of construction.
We'll see if my roundtable predictions come true...
No comments:
Post a Comment