MacRo LTD Blog

4 Sectors of Land and Commercial Real Estate: a MacRo Outlook

It has been a pretty wild ride the last few years for the land and commercial real estate market. 

2011 Real Estate OutlookThe Federal government has pumped trillions of stimulus dollars into the economy with questionable results.  The job market shows signs of a very slow growth, and local governments are trying to find things they can do to operate more efficiently in hopes to lessen its burden on the private sector.

In the end while recoveries are often gauged by the rate of employment, an important by-product is the recovery of real estate values.

The MacRo, Ltd. team is often asked for its version of a MacRo Outlook for the local real estate market.  And so,for what it is worth, since we are about leap into the twelfth year of the “New Millennium,” here are our thoughts on Land, Commercial, Office and Industrial Real Estate for Mid Maryland:

  1. Residentially Zoned Land and Building Lots:   Current inventory remains high compared to the number of buyers.  Values continue to decline at a rate of 0.5% to 1.0% per month … best guess is that values will bottom out for these subsectors in about 14 to 36 months.  There is a possibility that after values have another 36 months of slow but steady recovery, a surge in values could occur, as demand will likely put strong pressure on a very limited current supply of raw land planned for residential growth. In other words heavy inventory of salable product now, but very little in a pipeline that typically takes 5 to 10 years to gain final government approvals.
  2. Commercial and Office Real Estate:  Values struggle here as lease extensions are renegotiated and aggressive deals are made to fill vacancies.  Lenders are keeping close eyes on loan to value ratios, while some are telling their nonconforming customers to refinance elsewhere.  Location is still king in places where the traffic count is high, so expect values to hold better in such cases.  However, outside of that sphere, the trend shows that the bottom of the declining market is in sight, but still about 24 months out.  A value recovery will be slow.
  3. Limited Industrial/Flex Warehouse:  Simply put, there are miles of “see-through” flex space out there; but we’re seeing a glimmer of hope as more and more businesses have spent the last few years retooling to become LEANer operators.  Either way several years of supply out there; so with an over supply of improved property and raw zoned land, it’s gotta be at least 36 to 48 months before stability.
  4. General/Heavy Industrial:  Probably one of the more stable.  You say, Huh?  Simply put, while there is not a lot of activity, the demand is there, but with a very limited supply of zoned and good quality improved property in the market place.  Seems as  local governments did all their future planning, they figured that the next county over should take the “dirty industries.”  So while values are reasonably stable, they are still way off of 2005 levels.  Bottom line: this sector may well have already found its bottom and begin to experience the slow trek back up in values within the next 18 months.

As I said these are “for what it’s worth” opinions … ask another commercial real estate broker or MAI appraiser, and you’ll likely get a differing answer.  January is always an interesting month as the Maryland Bankers Association will sponsor its annual economic forecast session.   I’ll be in attendance;  so who knows, the MacRo Outlook will probably change!

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The author: Rocky Mackintosh, President, MacRo, Ltd., a Land and Commercial Real Estate firm based in Frederick, Maryland.  He also writes for

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