2012 Market View

nashville skyline

In addition to our normal posting of local news articles, we have posted the 2012 C&W Marketview.  This research paper reads extremely well and provides an excellent macroeconomic analysis of 2012.  The takeaway, if you don’t wish to read the paper, is a slow first half of 2012 with acceleration in the second half of 2012 and even greater in 2013.  The overriding logic for the slowness in 2012 is the need for governments to continue correcting their debt loads.

A few interesting points:

  • In 2006 the OECD, 31 industrial countries, debt to GDP was 75% and this ratio grew to 101% in 2011…..there is a lot of deleveraging to do!
  • Real estate opportunities will increase with improvement in financial institution’s balance sheets and their corresponding ability to rid themselves of unnecessary loans or assets.
  • Investment sales forecast to increase 25% over 2011 levels.

Far be it for me to contradict our CEO, but our experience in Middle and East Tennessee is suggesting rapid growth in the first half as you will note in our past articles.  I remain concerned about external events putting a clamp on growth (Israel and Iran, Greece, Taliban, US election, oil prices); consequently I would push to act as quickly as possible to capitalize on current strong fundamentals.

I will be speaking at a CCIM meeting in a few weeks and as I formulate my thoughts, one theme keeps recurring in my mind:

If you are a property owner or a real estate professional seeking to “put a deal together”:

  1. Raise sufficient equity, don’t cut corners on proper capitalization.
  2. Rely on banks for SHORT TERM only, avoid regional banks and be willing to pay higher rates for a local bank.  Banks are not your partner and have proven quick to seek divorces at the most inopportune times.
  3. Get out of the bank ASAP, permanent loans are plentiful and extremely inexpensive with the proper amount of equity.  Permanent lenders are not your partner either, but they will leave you alone for the term of the mortgage, so long as payments are made.

Have a great week.

MarketView2012

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About Cornerstone Index

Cushman & Wakefield | Cornerstone Nashville | Chattanooga | Knoxville

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