Just Like 2001 But Very Different

Implications: The recent Goldman Sachs analysis of the prolonged downturn in commercial real estate is based upon a strict comparison with the 2001 downturn during that recession. Their numbers reveal that the 38 REITs they follow will suffer a total return of NEGATIVE 4.5% Are they for real? What do these young analysts know about what is really happening in the commercial real estate markets? I submit, not very much!

Analysis: The three analysts responsible for this latest report failed to do their homework because their study starts with an obvious flaw in that it ignores the fact that since 2001 this country has become over stored, over officed, over warehoused and over malled. Most of the downturn would have  eventually occurred as a result of the over building. The sudden evaporation of cheap money and stupid lenders only accelerated the process.
 
They also failed to account for the fact that virtually every sector of the commercial real estate market has been suffering from heavily inflated  prices and a true "buyers frenzy" brought about by cheap money and unrealistic demand for product without regard to quality of location or tenancy or occupancy rates.

This commercial real estate "BUBBLE" BEARS NO RELATIONSHIP TO THE CONDITIONS THAT PREVAILED IN 2001 !  Therefore I would suggest that the Goldman Sachs report be ignored and GLG readers continue to take the bank analysts with the proverbial "grain of salt".