Nation's real estate outlook full of gloom, doom Realtor exposition in Baltimore finds little to cheer about.

May 09, 1991|By Kevin Thomas | Kevin Thomas,Evening Sun Staff dHB

It was all bright skies and warm temperatures outsid yesterday.

But, inside Baltimore's Convention Center, it was doom and gloom as local real estate developers, lenders and brokers gathered to discuss the current and coming dark days of the region's commercial real estate market.

The Greater Baltimore Board of Realtors symposium, entitled "The Changing World of Commercial Development," kicked off the board's one-day commercial and industrial exposition at the Convention Center.

Approximately 80 exhibitors were on hand, each paying $500 per booth.

Attendance ran higher than expected, with David Gillece, president of the Baltimore Economic Development Corp., quipping that a lot of people in the commercial real estate field may have had nothing better to do.

Still, during the morning symposium, the talk was of lean times as speaker after speaker decried the current slump. It was a less than uplifting start for the day's events.

The "golden age" of commercial real estate that characterized the 1980s is over, said Robert Frank, senior real estate securities analyst for Alex. Brown and Co.

The future will bring lower real estate values, more anti-development regulation and a lower demand for office buildings,Frank said.

Participants drew a picture of a commercial real estate landscape that includes buildings with high vacancies, others that are boarded up and banks turning a deaf ear to new projects.

With a consensus developing on the poor state of office construction, the day had those in attendance casting about for solutions but finding few.

"It isn't putting [Wall Street arbitrager Ivan] Boesky in jail that's going to solve the problem," said Morton P. Fischer Jr., real estate specialist and partner in the law firm of Frank, Bernstein, Conaway and Goldman.

"It isn't fining the leaders of Silverado," Fischer continued. "It's speculation that got us into this problem and the lack of regulation that permitted it."

Nonetheless, Fischer said, environmental regulations, anti-growthlegislation, federal law mandating appropriate accommodations for the handicapped and the state's high transfer taxes will hamper any real estate recovery.

Financing, or the lack thereof, was an issue. Asked what it would take to refinance a suburban, Class B office structure, Fischer responded that it would take "a rich uncle."

Still, there seemed some difference of opinion over the amount of financing available during the current slump, with some panelists saying banks are shying away from all projects, while some audience members pointed to equity partnerships and foreign investors as new sources of financing.

On the issue of where to find tenants in a down market, Dirk Mosis, a partner with the Trammel Crow Co., said developers and brokers should look to the Northeastern United States and Eastern Europe. Companies in the Midwest would be unlike

ly to relocate, he said.

With a generally well-educated work force and relatively good school systems in the region, "Baltimore ranks with any other city on the East Coast," Mosis said.

The vacancy problem could also take care of itself. Richard Alter, president of the Manekin Corp., said 36 months of no new construction should see vacancies lessening, leaving the industry in "pretty good shape."

But others disagreed about how long it would take for the commercial real estate market to recover, with projections running from three years to 10 years.

In the meantime, said R. Lawrence Koch Jr., senior vice president of PaineWebber Mortgage Finance Inc., the number of developers will shrink dramatically during the coming years, with only the strong surviving.

"Some are going to do very well," Koch said.

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