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Local biz property has better outlook

July 21, 2010
SOUTHBRIDGE — Talk to bankers and real estate agents and you get two perspectives, but they agree that the economy's effect on local commercial real estate isn't the same as the national picture.

In general, it's better here.

"I don't think it's fair to look at Massachusetts and our area in general through the same lens you look at the rest of the country," said Savers Bank Vice-President John Fearing. "… The doom and gloom you hear a lot on national news is not necessarily a true reflection of the part of the world where we live."

To Realtor Jean Sullivan, owner of Brimfield's Sullivan & Co., that's largely — and somewhat ironically — because local banks and businesses are too small for the big banks to pay attention to. She said she's seen, both personally and from others, that big banks aren't willing to loan to small companies, especially start-ups, but the long-standing local banks are.

Although economic woes nationally continue, particularly in larger urban areas, "there are quite a few people out there looking" for commercial property locally, and an increase in the number of people seeking to start businesses, Sullivan said. That makes her optimistic that "a very strong 2001" is coming.

Such a view is decidedly different from what the Urban Land Institute's 2010 Emerging Trends Report is projecting. That agency urges commercial developers to "write off [this] year, as well as 2011 and probably 2012." Going forward, builders should focus on "infill, urbanizing suburbs, and transit-oriented development," not traditional suburbs, it states.

"Over the past nearly 20 years, real estate has been highly volatile and the next several years will likely show compromised income flows," the report states. "We sold the stability and the income, then got caught up in growth and opportunistic gains. Now all bets are off in the losses."

Part of that comes from one stark piece of data, it later states: the nation has $3.9 trillion in real estate capital, but $3.1 trillion is in the form of debt, of which $1.8 trillion is held by banks, savings-and-loans and mutual savings banks.

Fearing said the local banks did not take the risky gambles the national banks did. Instead, they typically maintained the same underwriting guidelines and have been willing to work with clients in fiscal trouble, so local delinquency rates have generally been low.

He said he believes property values "have kind of seen the bottom" and will start rising slowly, albeit too slowly for some who might want to refinance their existing loans.

See Friday's Southbridge Evening News for complete coverage of community news.

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