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Commercial real estate showing gains, but financing issues remain

June 26, 2013

The data for several consecutive quarters has been crystal clear - Sussex County’s residential real estate markets have rebounded significantly from the economic downturn of the last few years. Now, commercial markets in southern Delaware and throughout the mid-Atlantic are beginning to show early signs of their own recovery.

Commercial sales have increased 35 percent nationally in early 2013, compared to the same time period a year ago. Southern Delaware’s commercial market has fared even better this year, with more than $4 million in commercial real estate sales during the first quarter of 2013. This marks a 38 percent increase year over year.

“There is absolutely no question that commercial real estate here in our area of the world is on the rebound, and in a significant way,” says Bob McVey, 2013 president of the Sussex County Association of Realtors, southern Delaware’s real estate trade association. “Builders are building again; companies are purchasing property for expansion and Realtors who specialize in commercial transactions are reporting more and more activity all throughout the county. We certainly see brighter days ahead for this sector of the market.”

The news could be even better if not for lagging recession-era issues in regards to bank financing. According to the most recent National Association of Realtors quarterly commercial real estate forecast, market fundamentals have vastly improved, but financing remains a challenge, especially for America’s small businesses.

Officials with NAR report that, despite improvement in the major commercial real estate market, 52 percent of commercial Realtors across the country have reported a transaction that has failed in the past year due to a lack of financing.

Real estate professionals point to regulatory uncertainty for financial institutions, as well as a lack of capital in commercial lending for small properties, as reasons why many commercial real estate transactions have failed in recent months.

Sussex County Realtors are keeping a close eye on the issue and hope to see improvements in the sector in the near future.

“Part of our mission here at SCAOR has always been as a legislative watchdog, and we are certainly aware that there are current issues related to the commercial lending industry,” says McVey. “We are keeping a close eye on this and, as always, we will work toward providing a unified voice anytime we feel we can make a difference. We expect progress to be made in this area in the coming months, and anticipate an even more significant bump in the sector when the financing issue becomes more stable.”

NAR’s commercial real estate outlook is published each quarter by the organization’s research division. The commercial division, formed in 1990, provides targeted products and services to meet the needs of the commercial market and constituency within NAR.

To address the special needs and interests of commercial Realtors in southern Delaware, SCAOR founded the Peninsula Commercial Alliance in 2011. To date, the PCA has been a successful resource for that sector of the Sussex County real estate market.

To read more about issues related to Sussex County’s real estate industry, visit www.scaor.com.

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