• Stan Ross, chair of USC Lusk Center for Real Estate … He said today that the nation likely will have a weaker economy next year, and "that spills over into the commercial sector." Ross stopped short of predicting a commercial downturn. But he warned that real estate investors, developers and service companies need to start preparing now for what could be a tougher business environment. He advises that they review their company's financial health carefully, look at how their tenants are being impacted by the economy, study their cash flow and devise backup plans.
Commercial real estate "will clearly be impacted" by a weaker economy, Ross said. "The question is how much and where and what products." Ross noted, for example, that the subprime mortgage mess affects tenants who are mortgage brokers and lenders. More stringent underwriting standards will mean less capital is available for projects. And capitalization, or CAP, rates will likely go up, which means that property values will fall.
"Not by a lot, not dramatically, but clearly, you start to see that creeping in," he said of such declines. "Standby. It is a world of uncertainty. You're not sure that something bad will happen or how deep it will go," he said. "(But) it's smart to do some planning. … Take a hard look at the implications for you."