Nothing gives hope more of a boost than low expectations. Just ask the members of the 1980 U.S. men’s Olympic Ice Hockey Team, or the same group in 2010.
In 1980, in Lake Placid New York, the Americans were scheduled to play the dreaded Soviets – a team that had won every Winter Olympic ice hockey tournament since 1960. No one expected success. Keeping it within five goals would have been considered a victory. After all, the Americans suffered a 10-3 drubbing against the Soviets in Madison Square Garden just a few weeks before. We all now know that those college kids went on to defeat the Soviets and create the “Miracle on Ice”.
How about the 2010 U.S. men’s ice hockey team? The lowly Americans faced what all agree is an NHL All-star team in Canada’s national team. David Backes and Dustin Brown (who are they?) from the U.S. were to play the likes of Stanley Cup MVP Sidney Crosby and number one draft pick Joe Thornton of the San Jose Sharks. No one expected the U.S. to give Canada a game, least of all the Canadians. After stopping 43 shots, scoring five goals and winning a 5-3 heart-stopper, the Americans left the Canadians to the ravages of the Alexander Ovechkin and Russian team, while they rose to the medal round. Such are the vestiges of low expectations.
Yet much comes from expecting nothing.
So what about the 2010 Commercial Office market? If you’ve been reading the paper (excuse me, I am so old that I still read the paper) or reviewing your Google Reader on the mobile device of your choosing, then you know that expectations are very, very low. So low are expectations that – as far as cap values and occupancy rates go – no one is sure that we’ve even hit the bottom. The economy, like those dreaded Soviets, has been beating on valuations for so many months it’s hard to remember when we actually won one.
Enter the winter of 2009 – 2010.
Commercial real estate sales activity has jumped out of its skates. Property sales rose 75% in December 2009. The Moodys/REAL all Commercial Property Price Indices (CPPI), which tracks values, measured a 4.1% increase at the end of the year following an increase from the prior month – the first time we’ve seen consecutive monthly increases since 2007. True, the market continues to face foreclosures; bankruptcies, and frozen credit, but like those old Soviets, they are on their last legs. Commercial activity is slowly picking up in all markets. There are more qualified bidders on available properties than the market has seen in months. It seems that all the money that’s been riding the pine has begun to jump the boards and skate hard for the U.S. economy. Commercial real estate bulls agree that the market continues to suffer, but they also agree that it’s doing much better than they thought. That’s the key. Good will from exceeded expectations spreads like jingoistic fire around an Olympic flame. So I, for one, am confident that the Commercial Office Market has begun its comeback. It’s still the first period and we’re down a few points, but assets are indeed undervalued and asset values should being to rise – and with them the hopes of all Americans for a “Miracle on Price.”