A Commercial Real Estate Survival Plan

The latest from NetGain:

Based on all the relevant economic data, what do the next twelve months have in store? NetGain has stated on numerous occasions that the next twelve months will be a difficult time for commercial real estate investors. You don't need a degree in economics to know that consumers account for a majority (70%) of the economy and that as a group employed people propel the economy. From these deductions, one only has to look for two words in the newspapers to know where the economy is going: "hire" and "layoff".

During the past six months, how many times has the word "hire" appeared in the newspapers? Practically none. During the past six months, how many times has the word "layoff" appeared in the newspapers? Almost every day. The obvious conclusion is that unemployment numbers are going up. Higher unemployment will result in declining consumer confidence, declining consumer spending, and finally a weaker economy.

Everyone knows the economy is weaker. The gross domestic product (GDP) grew a paltry 0.6% for each of the last two quarters. The key questions are how much worse will it get and how long will it be until the economy starts to improve? NetGain believes that the current economy will continue to decline. NetGain also believes that we have seen the worst of the slide and that any further declines in stock and real estate values will not be significant. The economic turnaround that everyone is looking for will begin within the next six to twelve months. This all assumes no foolish legislation or terrorist attack(s). Remember: This is only an opinion. The economy can certainly get much worse, and a turnaround can take longer than NetGain's projection.

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