Long-Term Solutions Needed to Revive Economy

12/7/2011 | By Matt Bechard
Tim Riddiough, professor of real estate and urban land economics at the University of Wisconsin-Madison, said he expects 2012 to play out much the same as 2011 in terms of economic recovery efforts.

Speaking with REIT.com during REITWorld 2011: NAREIT’s Annual Convention for All Things REIT in Dallas last month, Riddiough said you will not see the benefits of good political decision making immediately. He pointed to issues that require a long-term thought process and commitment to solve.

“Our education system is broken. That has been one of the long-term competitive advantages that the United States has had in the world, and that advantage is eroding,” Riddiough said. “Reinvesting in our educational system is really important. We won’t see dividends from those investments immediately, but that is the kind of thing we need to consider.”

Looking at the commercial real estate space, Riddiough said there is a trifurcation at play. “The upper end of the market (higher quality properties located in coastal cities) has been doing very well,” he said. “What are still struggling are the middle and lower ends of the market. We have a large number of commercial banks in the United States that are struggling with poor commercial mortgage loan performance, and we haven’t seen the recovery in the lower and middle-tier market.”

Riddiough said not enough attention has been paid to the looming debt maturity crisis in the commercial real estate sector. He said because 2003 to 2007 was the boom for commercial real estate lending the majority of these loans will begin coming to due in 2013 and will cause a real issue through 2017.

“This will be an even bigger issue as we get into 2012, especially if the economy doesn’t improve,” he said.

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