ON THE MEND

No, an episode of The Dating Game didn't break out; in fact our first panel joked that neither wanted to win a date with our moderator, Haynes and Boone partner Rick Martin, left. Michael, center, says if '08 was the hurricane where you wanted to duck and cover, and '09 was an eerie calm where you saw carnage but were still in paralysis about whether the storm would come back, then '10 is about feeling the worst is over, repairing the problems, and building a future. Behringer Harvard president Bob Aisner, calling himself a “pessimistic optimist,” points out that with 8.5M jobs lost since the peak and only 1.5M added per year, things will remain tough a while and predicted significant improvement only in '11-'12, though he noted, “We won't drift back.”

Michael says he believes the downward spiral is done because now owners are "okay not doing a deal." Pricing is at the bottom, and landlords don't have pricing power yet until there's some absorption. Bob says the good news is about 30M SF of office leasing was done in the 1Q, which is a 100% jump over last year. The bad news is that no one wants to pay anything to make those leases, he says, adding that the leases aren't very attractive. Like many a Dating Game contestant, some leases are actually being turned down.

Henry S. Miller prez Sam Kartalis, Duke Realty EVP Jeff Turner, Stream Realty co-managing partner Mike McVean, and Ernst and Young partner Chris Seyfarth, who reports more than 200 banks have closed in the last couple of years with another 700 on the government watch list. He says the question is "can banks continue to hang on to this debt?" It will continue to pile up as loans mature. Some loans will extend and some won't, providing opportunities for those with capital. He adds that one of the real opportunities may be buying debt rather than the asset itself.

Grubb and Ellis executive managing director Moody Younger says the market conditions are less worrisome than liquidity: “There hasn't been liquidity in the capital markets or in businesses. The market had rigor mortis.” While values and rates aren't as high as they were, there are transactions being done, he adds, noting that from a value standpoint, the market is at the bottom. “I don't see it getting much worse.”