Distress Takes a Dip As Economy Perks

Fears of another recession, global debt levels, uncertainty regarding taxes and regulation are confidence killers among US companies that must drive a fundamentals-based recovery to heal the consumer sector. The recovery may be lacking momentum, but evidence suggests contraction is unlikely, barring an unexpected shock. Companies have wrung maximum productivity from their operations and need more help, leading to improved, if below average, job growth in 2011. Election results should contribute to reducing uncertainty and move the political agenda more to the center, with likely compromises on key issues. The impact of the Fed’s bond purchases may be questionable, but the message of readiness to shore up near-term conditions is clear.

The apartment recovery rallied above expectations in 2010 thanks to the release of pent-up renter demand, lower tenant rollover and job growth. Occupancies in other property sectors are at or close to bottom, and gradual recovery will begin in 2011, led by industrial and retail, then office properties.