While vacancies in office and retail space remain high, apartments and multifamily units are making a comeback in the commercial real estate market, one real estate expert noted.
Hessam Nadji, senior vice president of Marcus & Millichap Real Estate Investment Services, said companies are reluctant to hire full-time workers and are not yet confident enough to invest in big expenses.
"It's not quite as bad as it seems, and it's worse than it looks," joked Nadji, speaking to attendees at CU Business Group's National Business Services Conference last week in Portland, Ore.
Apartments and multifamily are coming back very strongly, according to Nadji, due to short-term leases adjusting to a better market. While office and retail continue to be weak with no improvements forecasted in the next year, he indicated that there is a lot of "cash on the sidelines" as investors wait out the uncertain economy. However, investors are getting impatient with low yields.
"The current spread between commercial real estate returns and treasury returns is beginning to bring a good sum of that sideline money back into the game," Nadji said.
Even as some credit unions remain reluctant to enter the commercial lending realm, CUBG President/CEO Larry Middleman said "the recovery of the apartments and multifamily segment and investor demand both bode well for credit unions as they look to expand their commercial lending."
Nadji told conference attendees that Encino, Calif.-based Marcus & Millichap a commercial real estate brokerage, is interested in working with credit unions to expand financing alternatives for businesses and investors. Middleman echoed this sentiment and said the two firms will continue dialogue in the near future.