by Brandon Sudweeks

Like most professionals, real estate investors and brokers are all pleased to see the end of one year and look forward to the prospects of the year to come. 2011 saw deepening problems for the European Economic Community, witnessed the dysfunctional wrangling of the US House and Senate, and watched the US economy continue to struggle with issues of unemployment, real estate valuations and debt.  

However, we also observed how effective our state and national leadership can be when united in a particular purpose and we marveled as communities and industry came together to support those hardest hit by causes both natural and manmade. In the face of all of this, the California economy, just as that of the US, showed remarkable signs of stabilization and strength. It was a great year and we’re pleased to have it behind us.

In Southwest Riverside County we saw the commercial real estate market hit “bottom” and start to show signs of life and a stabilized yet slow recovery. All market indicators are trending upwards and we predict 2012 to continue this trend.

Show Market reports: On a national basis, 2012 holds promise for a stronger and more vibrant economy. Few credible observers have any expectation of recessive times for 2012… and this is an election year. As such, virtually all available resources are rallied to see to it that any surprises are to the up side. But that doesn’t mean there aren’t areas to carefully monitor; including Europe, the employment markets, energy pricing and the US presidential election itself.

Unemployment holds the key - Although Riverside unemployment is still copiously high at 12.8% it has dropped considerably from 15% in July 2011. More than most economic indicators, employment levels are the direct product of expectations – real employment levels for 2012 will be more of an indication of optimism on the part of business owners, either high or low, than any other single factor.

The effect of the European Financial Crisis - Though there is clearly the potential for further weakness in Europe, the debt and equity markets have been consistent in recognizing this and pricing assets and yields accordingly. Likewise, European leadership has exhibited strong resolve in dealing with the difficult realities of having national fiscal sovereignty hampered by a regional monetary policy. Barring unexpected influences, interest rates look to remain very low and equity prices, including those of real estate should trend upwards for the year.

Potential instability in Energy Prices - Energy prices have stayed within a higher-than-optimal range, but haven’t broken out on the high or low side. This could see substantial change depending on the effectiveness of international efforts to keep Iran and North Korea from threatening the relative peace in their respective parts of the globe and could also be impacted by energy demand from China and India; something of a good news, bad news scenario. Economic slowdowns in those developing economic powerhouses would yield lower energy prices globally, but could also further dampen demand; more a problem for their export driven economies than more for the US and Europe.

Presidential prospects - And then there’s the US presidential election. National polling results suggest that one of the only groups less popular than the current inhabitants of the White House and its West Wing are those occupants of the offices and halls of the US Capital Building. Though President Obama continues to garner the respect of most Americans, Republican presidential candidates may be more effective at preaching the gospel of hope and change than our nation’s chief executive. If the tide of change extends to the White House, it’s likely attitudes and expectations will drive a more robust economy through 2012 and into the next year.

In the end, the fate of our local market and nation’s economy is simply the national reaction of millions of consumers, investors, business owners and government officials. In all aspects of the commercial real estate market, we’ve seen these reactions in a positive light, as millions of dollars of investment funds become available. Properties are selling, investment money has infiltrated the local market, making the outlook for 2012 optimistic.

Brandon Sudweeks is CCIM, CEO of Coldwell Banker Commercial Sudweeks Group.