Friday, Sept. 6, 2002 | 11:06 a.m.
The slower-than-expected economic recovery and uncertainty in the aftermath of corporate scandals have delayed recovery in the nation's commercial real estate market, said a top executive of international real estate brokerage CB Richard Ellis on Thursday.
Addressing more than 2,000 company employees, clients and real estate professionals at a company meeting in Las Vegas, Ray Wirta, chief executive of the Los Angeles company, predicted commercial real estate leasing activity will continue to be slow, with rents and vacancy rates hopefully stabilizing in the next four to six months.
"Business isn't what we had hoped it would be, but it is picking up. In our primary business line, which is based on revenue and leasing, it's going to be awhile," he said. "In this challenging and difficult time, we will focus on growing the company through acquisitions, joint ventures and partnerships."
"The industry continues to consolidate," Wirta said. "We know GDP (Gross Domestic Product) in the first quarter was terrific, well ahead of expectations. People had high hopes for the second quarter, but it dropped off. Now we're uncertain about the third quarter. Corporate America is sitting on its wallet."
"Overall, there's an air of uncertainty in corporate America that will definitely impact us," he said. "We see a recovery. It's just not going to be in the third quarter, hopefully it will be in the fourth quarter and beyond."
Meanwhile, John Knott, managing director of the Las Vegas office of CB Richard Ellis, said he expects leasing activity in Las Vegas to increase over the next few months and construction activity to return to previous levels.
"Absorption -- that is, the pace at which Las Vegas retail, office and industrial space is leased -- for 2002 is slower than historic levels but has improved from 2001," Knott said. "With the slowdown in construction, vacancy rates for second-quarter 2002 also dropped. And we're expecting that declining vacancy rate trend to continue for the rest of the year."
CB Richard Ellis' Las Vegas office, established in 1981, has 65 employees including 25 sales professionals. It plans to increase the number of sales professionals to 35 over the next two years.
A CB Richard Ellis report issued July 15 said Las Vegas industrial vacancies for the second quarter 2002 were 9.46 percent, down from 10.03 percent in first quarter 2002.
About 313,000 square feet of industrial space came on line in the second quarter and more than 2.8 million square feet is currently under construction, with another 769,530 square feet in the planning stages for 2002, the report said.
Meanwhile, Wirta said the company is very close to having zero tolerance for corporate fraud and that both he and the company's new chief financial officer Kenneth Kay have agreed to regularly certify the accuracy of its financial reports in response to corporate fraud and accounting legislation signed into law by President Bush about a month ago.
Wirta, who said the company recently hired auditor Deloitte and Touch to replace its former auditor Arthur Andersen, said the company's new audit committee and Kay gave reassurances about the past activities of CB Richard Ellis' chief financial officers.
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