By Bill Severi

I Googled this question and came up with four trends that are affecting lenders, investors, brokers, and owners of commercial real estate:

1. Soft economy
2. Many investors are sitting on the checkbooks
3. Scarce capital
4. Sellers' price fantasies

While these trends impact the current market for commercial investment real estate, the underlying fundamentals remain unchanged.

Soft Economy. Rapidly rising oil prices, declining housing values, consumer fears, less tourism and vacation spending, and contraction of overall GDP an election year all effect occupancy and rent growth projections. The thing to remember is that these changes are cyclical, and – more importantly – uncertainty breeds opportunity.

Investor Reticence. Until recently the Fed has been rewarding investors for sitting on their wallets. However, interest rate cuts in 2008 will require investors to get back in the game or see their gains in the cash market eroded. The continued weakness of the U.S. dollar also will punish the fence sitters who are hoarding cash well into 2009.

Scarce Capital. It's no secret the effects of sub prime meltdown continue to reverberate through all the capital markets with the result that traditional lending sources are taking their time and acting more conservative in their underwriting, effectively reducing the number of transactions in the pipeline.

Sellers' Price Fantasies. The reduced number of transactions reflects sellers' unrealistic expectation on prices. They are still getting revenue from their properties and aren't willing to lower their asking prices out of fears that the market will continue to worsen. However, unlike in previous years, it won't be easy for sellers to refinance to generate cash. This should force prices to more closely match bids in the next few months.

My experience tells me that regardless of these factors, there are opportunities for investors willing to study markets, like today's, where the economic forces have shifted the balance in favor of the tenant and buyer:

Leasing – It is a good time to secure that long term lease on facilities. Rents are more negotiable now then have been for a long time. As the economy turns around and certainly within 2-5 years, you will see rents going up dramatically as new construction comes on line with inherently higher construction costs.

Sales – Good time to buy. Sellers are a little more flexible on pricing and the institutions are not in the market inflating prices by trading portfolios of major properties.

Some pricing is very good and less than replacement. Industrial and Industrial/Office flex in Sonoma County are very realistic in pricing. As rents pick up in a few years those acquisitions will look very good at today's pricing and tomorrow's rents.