What is looking like a jobless recovery will spell a tepid economic rebound that will not fill buildings. The shakeout period for commercial real estate is now expected to extend several years. Unlike the last crisis, in which overbuilding affected new product, this time around vacancies are affecting the entire built environment, new and old alike. Owners without long-term leases to bridge the downturn will have a hard time surviving 2010.

In the United States, commercial office vacancies nationwide jumped to 17 percent in 2009, and value declines are ultimately expected to average more than 40 percent of mid-2007 pricing peaks, according to ULI’s Emerging Trends in Real Estate® 2010. For the second consecutive year, the office sector experienced a 74 percent decline in transaction volume, reports Jones Lang LaSalle. But while office values decreased 18 percent in the past year, values are starting to decline at a slower rate, according to Integra Realty Resources, which is projecting only a 5 percent drop nationally over the next six months.

Because few buildings are completely empty, massive foreclosures have been avoided either through existing tenants covering debts or lender willingness to work with owners. However, the sector will continue to struggle because of diminished demand and excess stock, plus a continuing decline in leasing rates. Reasonably positive long-term outlooks are being projected for 24-hour coastal gateway cities, such as Washington, D.C., San Francisco, Boston, and New York City.

The commercial office sector also is beginning to stabilize in Europe, where the average vacancy rate is 10 percent. Cities in the U.K., Germany, and France continue to dominate investment activity, while Warsaw and Moscow are being hit particularly hard.

The best news is coming out of Asia Pacific, where, according to Jones Lang LaSalle, ample liquidity continues to gather pace and yields started to compress as asset prices increased, sparking more transactions and leading to capital values starting to rise. China and India are the favorites for a speedier recovery.

Here is what some industry experts are predicting this year: l cash-flush investors will focus on vulture deals for trophy properties in top markets; l cross-border investment will resume: wealthy Asian and Middle Eastern buyers could be active bottom feeders in 24-hour gateway cities like New York; l proactive lenders will manage commercial real estate assets to capture higher sales prices for properties; l there will be a greater focus on asset management and leasing strategies, with an emphasis on corporate governance and market transparency; l sidelined equity capital will begin to reenter the markets as a market bottom forms; l cap rates will stabilize or rise; l real estate investment trusts (REITs) and equity funds will reenter at the perceived market bottom; l life insurance companies will be large debt lenders; l office tenants will look for productivity gains from lowering space-per-capita ratios, will seek big accommodations in rents and concessions, and will obtain upgraded space and locations at zero or little cost, which will increase leasing activity; l commercial retrofitting will continue as a way to cut operating costs; l green building activity will grow more than 60 percent; l the coming global water supply crisis will lead to further steps to reduce water consumption in buildings; and l zero-net-energy designs will become increasingly more commonplace for new buildings.

Survival strategies are taking some unusual yet interesting turns. For example, educational institutions are becoming a significant player in the office market, with student dorm rooms filling a number of vacant buildings. In addition, entrepreneurs and film studios looking for vacant space are, in some cases, being offered tax credits and cash rebates, while municipalities are considering acquiring vacant properties to be developed into parks and green space.

Going forward, next-generation projects will increasingly be oriented toward infill, with smaller housing units close to transit, work, and amenities gaining favor over suburban stand-alone projects. The operating efficiencies and competitive advantage of sustainable product will increasingly be more than worth the minimal extra cost.

Any competitive economic advantage in this market will be obtained through identification of one’s assets and determination of creative ways to convince investors and businesses that what one has to offer shares that competitive advantage with them.