Real estate looks grim in '09

Charlotte's commercial real estate market is likely to fare better than many next year, but the broad outlook from a leading forecast group on Tuesday was far from rosy.

“2009 is not going to be a good year,” Stephen Blank of the Urban Land Institute told about 250 people over lunch at the Westin Charlotte. “No quick fix,” he added.

The ULI, an influential education and research group, has published “Emerging Trends in Real Estate” for 30 years, during which it has become a well-regarded outlook on commercial real estate. PricewaterhouseCoopers is the national group's partner on the report, which this year reflects surveys and interviews with more than 700 industry experts, including investors, developers, lenders and consultants.

Blank warned of a downturn during last year's presentation. This report, like his presentation, was generally grim, with such titles as “A punishing time.” The report says 2009 will be the industry's worst since the early '90s, reflecting a wrenching downturn that has tightened lending, eroded jobs and made consumers fearful.

“Commercial developers confront a dismal year,” said the report, which covers U.S., Canadian and Latin American markets. The outlook calls for substantial declines in property values, sharp increases in foreclosures and a weak economy that “likely will crimp property cash flows.”

No markets are expected to be stellar, but large coastal cities, such as San Francisco, New York and Seattle, are favored for investment because of their global links, attractive city living and diverse economies. Charlotte rates brief mentions as a smaller market in the 76-page report. For investment prospects, the outlook ranks Charlotte as fair and, for development, modestly poor.

Growth continues for the area, the report says, but the loss of Wachovia in its sale to San Francisco's Wells Fargo will hurt an area cast as closely wed to the fortunes of the big banks – Bank of America and Wachovia – and Duke Energy.

“The Carolinas provide a low-cost alternative to the Northeast and Florida with a pleasant Goldilocks climate,” said the report, which includes remarks from participants. “But Charlotte shivers in its boots over Wachovia's demise. That market depends on two banks and a power company.”

The report's “best bets” for development include infill and mixed-use. Both are popular in Charlotte. For example, the $225 million Metropolitan project combines condos and retailers such as specialty grocer Trader Joe's, Target and Home Depot Design Center.

Green building to cut energy costs and development along rail lines or other mass transit also are favored. Investment best bets advise patience. Cash is king in a tight credit market, and there will be bargains.

“Investments made in 2009 could result in substantial future returns,” the report said.