Global Changes Produces Demand

March 16, 2011 - PRLog -- The question is on the mind of owners, investors and lenders.  The economic shift that has taken place over the recent years has placed much of the real estate market from commercial office buildings to houses at value levels in some cases below replacement cost rendering land values in some areas in the negative zone.

Economic reports indicate that much of the world namely Germany, France, Mexico and others are pulling out of the world recession.  The United States has shown some strength in that investment banks and hedge funds have shown profits, the auto industry is showing increases in demand and price levels are reaching a point whereas products and services have deflated to a point of affordability.

Many positive economic signs have emerged.  However, where is the consumer?  Other reports in the USA indicate that consumer credit scores are at all time lows.  Job creation is yet to be seen and government stimulus has peaked.

The decrease in currency values relative to the dollar indicate that prices for imports have decreased further.  Thus, can new affordability be the impetus for consumer driven economic recovery?

The housing market around the globe appears to be over built.  In some areas there is simply not enough population to fill the 7 to 12 percent vacancy gap.  Investors are buying at a rapid rate.  Capitalization rates are low and have continued to remain low due to increased vacancy.

Profit is the motive for production.  For real estate to increase in production, a reasonable expectation of profit must be realized by investors.  With much of the market trading at replacement cost levels, it's difficult to see profit on the horizon.


It is not likely that production of real estate projects will rise significantly.  However, if the Euro economies emerge as winners due to increased exports since the Euro devalued, demand in some regions of the world could increase such as Costa Rica and other Central American regions for resort and second home opportunities.

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Wert-Berater, Inc. is a provider of feasibility studies for real estate development projects including USDA Business and Industry loan guarantee programs throughout the USA.