Though regional commercial real estate managed to escape the toxic effects of the sinking residential market during the first three quarters of 2008, it caught up with the industry in recent months and may continue to weigh it down in 2009.
“You really have to look at 2008 as being two totally different markets,” said Francois DeJohn of Hayes Commercial Group in Santa Barbara. “For the first nine months, the economy and commercial real estate market was doing quite well. But as of Oct. 1, it was a totally different story; the sales side of the market has come to a virtual standstill.”
DeJohn said that in Santa Barbara alone, commercial sales dropped from $184 million in 2007 to $72 million in 2008 – a 61 percent decrease in total dollar volume.
“That’s pretty significant,” DeJohn said, “considering the last five years have all been around $164 million on average. We basically did half of what we usually do. That’s a sobering statistic.”
Standstill was also the word used by the National Association of Realtors, or NAR, in the group’s 2009 market outlook report, which cited rising home sales, declining home prices, stricter loan underwriting standards and the financial meltdown as factors in the “turbulent” 2008 market.
“Everyone’s pretty freaked out, and they’ve put their decisions on hold,” DeJohn said. “People believe that the market is going down, not up, so people are kind of sitting on the sidelines right now. So not only has the mood changed, but on top of that, financing has also gotten more expensive and a lot more difficult to obtain.”