The commercial real estate market, from a national and global perspective, teeters on another possible downturn, say top executives of large publicly traded firms in the industry.
The comments, which CEOs made during recent second-quarter earnings calls, are part of a report on the industry from CoStar, a real estate data firm. The major theme in the report is that even though sales activity, especially in the U.S. and South America, is solid, several problems hover over the industry. These issues aren't new, from uncertainty about elections to slow job growth to the European economic mess.
Another trend doesn't bode well for Gulf Coast landlords: Tenants nationwide continue to delay expansion decisions, which has led to a decrease in lease volumes and rates. For example, Chicago-based Jones Lang LaSalle projects leasing volumes in 2012 will be 10% lower than 2011, according to CoStar.
“We recorded steady results in a cautious market environment,” Jones Lang LaSalle President and CEO Colin Dyer says. “Prospects for growth in the global economy weakened during the second quarter as U.S.-earned problems in particular continued to weigh.”
Dyer adds that “the tone of the market is less confident than six months ago.”
Predictions of more uncertainty combined with cautious optimism from CBRE Group CEO Brett White, meanwhile, sound like something dozens of other executives, in every industry, say these days. “The recovery continues to progress, but at a historically slow pace and with a high degree of inconsistency and uncertainty across global markets and business lines,” says White, according to CoStar. “Nevertheless ... We are cautiously optimistic about our business, and remain comfortable with our ability to deliver on the full-year earnings per share outlook we announced early this year.”
Jones Lang LaSalle and Los Angeles-based CBRE are two of the largest commercial real estate firms in the industry, with $3.6 billion and $5.9 billion in 2011 revenues, respectively. CoStar reports that both firms are increasing the amount of outsourced work, to become more efficient.