Commercial Real Estate: Gold Mine or Time Bomb?

Commercial real estate has been the eight hundred pound gorilla in the room of America's economic recovery for quite some time now. And there are currently a couple duelling forces at loggerheads to suggest which direction this highly volatile market sector is going in.

It seems that, right now, for every indicator that commercial real estate is about to become the giant flaming albatross around all our necks that drags the economy to the bottom, it's got another indicator that it may just come back.

For instance, we all know the retail sector is still sluggish, but some reports suggest that at the very least it's starting to show improvement. We all know about the general austerity movement that suggests people are deleveraging debt, that credit is harder to come by, that home equity loans that fuelled a lot of spending just five years ago are tapped out because many of these houses are now under water in their loans, but recently announced was a sweetened move by Simon Properties (one of the biggest owners of shopping malls and similar complexes worldwide) to buy out competitor General Growth. And on top of THAT, there's some evidence that suggests REITs (real estate investment trusts) are starting to show higher yields.

There's a lot of dissimilar threads in that paragraph, folks--and when you weave them together, what you get is a tapestry with a big question mark on the front like a cape that Matthew Lesko might have worn back when he was hawking his books nonstop. Chances are commercial real estate will never truly die--not so long as people have things to sell--but I'm not sure it'll get back to where it was. It may be a good time to park a little cash in an REIT, or the like, because there's evidence enough of some comeback to get a bit of profit on, but that's not a bet-the-farm move.