Wednesday, January 28, 2009

"Its Always Sunny in Philadelphia" - Part II

On Monday we took a look at the Macro level economy as far as how credit market turmoil has disrupted the commercial real estate cycle. Today we will take a brief look at how it has affected the Philadelphia marketplace.

On Friday, we will post a verdict, which is our cryptic attempt at advice for the commercial real estate investor as how to best keep deal flow fluid in a stagnant marketplace.....


An investment in knowledge pays the best interest.

The real question is: what will be the reality for sellers in the Philadelphia MSA?

Due to the pressures of the economy, investors often flock to safer investments and safer markets in times of uncertainty. Philadelphia, across all product types, has long been viewed as a static market. It never provides huge upside in an up cycle, but it provides more stability and downside protection when the market crashes as it has recently, hence its current attractiveness. While many buyers consider the current process to evaluating and buying real estate as a waiting game, in markets like Philadelphia, there simply may not be as much pain to find, or wait for, as there is nationally.

If we use the housing market as a precursor of what’s to come locally versus nationally, considering the commercial real estate arena is often a lagging indicator, there won’t be much opportunity to find here in Philly. Sure, there are home/condo foreclosures in Philadelphia. Just try finding one in center city. They don’t exist. As investors position themselves with the local banking community to attempt to gain access to their REO coffers, they will find the same thing on the commercial side. Sure, banks will foreclose on properties in the next 12-36 months; they just likely will not be properties investors have any interest in buying.

So you may be asking yourself: So what should I do? Stay tuned as we attempt to answer that question Friday!

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