Last month’s issue focused on Medical Office Property and I wanted to switch gears this month in order to give people a sense of what I have been seeing and hearing as we sail into the middle of the first quarter 2009. I am constantly in communication with architects, attorneys, engineers, appraisers, lenders, mortgage brokers, title companies, construction companies, contractors amongst many other companies that are doing business here in northern NJ.

Architects are telling me that the pipeline is not looking great these days and the architects are typically a good place to turn to when you want to see the pipeline for construction jobs to come in the near future. This is mainly due to the fact they need to create and design something that will eventually be constructed and it takes time to plan, especially when doing business in the bureaucratic state we live in! Another thing architects are telling me is that new business being fed into the pipeline is business from companies with the intent to downsize their facility needs as their leases turn-over, or they are two to three years from lease expiration and they are contemplating the concept of subleasing their existing space to offset some of their overhead.

Real Estate attorneys are also seeing a transition due to the economic climate; many of them are working on deals differently today than in past years. They are focusing on loan foreclosures, work-outs, and bankruptcies. They are going to see more work from clients that have Tenants not able to pay their rent and/or contemplating going out of business. They may have to work with Tenants to offset/mitigate damages due to the fact the leases still have substantial term left. I am faced with one circumstance right now with a Tenant I put into a building a few years back that simply could not survive. The advice I gave to this Client, and advice I am giving to others, is to hire a qualified Broker who can implement a full (creative) marketing campaign to stir up interest in order to fill the vacancy, and also become much more aggressive in terms of negotiating with a potential replacement tenant. Besides, the Client must mitigate damages for when the case ends up in court for the “bum” tenant. These projects will further lead to heightened demand from lawfirms.

Engineers are telling me that there is a pipeline to come from government related jobs. Infrastructure is going to be a focus in the foreseeable future simply based on the fact that the government’s stimulus package is going to include infrastructure improvements, school upgrades and/or relocations. This will also create a domino effect in terms of getting other construction related jobs from the construction management level to the general contractor and follows suit all the way down to the subcontractors.

The smaller lending institutions are still active; they did not get involved with bad loans and even though they may face some troubled situations, they will have to eventually place money since that is one of their core businesses, even if they are forced to undertake more stringent underwriting procedures. Lenders also are finding themselves working with their clients to work out troubled loans, and this problem is going to be amplified as current commercial loans come due and refinancing these properties may not be as easy as it was in past years. Appraisers have also been faced with pressure to evaluate property values that are far less than the valuations they were able to produce in recent years. Furthermore, appraisers are busy working for lending institutions that are implementing more stringent guidelines to protect and oversee the statuses their loan portfolios more carefully.

You can see from the information above what I am hearing from my peers today and the way business is done now and going forward should not be looked upon negatively, but rather people are going to have to refocus attention in order to survive this economic downturn. At the same time, I think this correction in the marketplace is long overdue and this re-focus will open the doors for many opportunities in the future. The world is in your hands and you get out of it what you put into it. Therefore, caution yourself on the projects you get involved with and whom you are going to work with on those projects; I cannot stress the importance of good, long-term business relationships.

I think this month’s topic was worth exploring and sharing with you, and I will refocus other future articles with an update on this subject matter. I hope you found this briefing informative and I welcome you to contact me for further dialogue! I wish everyone a great month and look forward to sharing with you more of my thoughts and ideas in March!