BY JOHN GALLAGHER
FREE PRESS BUSINESS WRITER

Commercial real estate investors face another bleak year in 2010, but the market appears to be bottoming out nationally and in metro Detroit, a leading real estate firm said in its annual forecast Monday.

“Many have called commercial real estate ‘the next shoe to drop,’ but that’s really an exaggeration,” said Bob Bach, senior vice president and chief economist of Grubb & Ellis, which has an office in Southfield. “It implies that commercial real estate could wreak damage on the financial system equivalent to the subprime residential mortgage losses, which is highly unlikely because the value of outstanding commercial mortgages is a fraction of the value of outstanding residential mortgages.

“Nevertheless, losses will mount over the next several years. If banks aren’t lending because they’re coping with losses in their real estate portfolios, this could impede the economic recovery.”

Locally, a more stable, leaner automotive industry should encourage potential investors to give Michigan another look in 2010, the company’s annual forecast said. While rents and building occupancy are down, pricing is also at record-low levels, presenting opportunities for those willing to invest in the region.

The credit crunch and nationwide real estate crash affected all sectors of commercial real estate last year, including office, industrial and retail, both nationally and locally.

Commercial real estate, especially the office and industrial markets, closely tracks the broader economy. With Michigan’s automotive sector devastated in recent years and state unemployment topping 15% in 2009, it’s no surprise that metro Detroit has been posting some of the highest commercial vacancy rates and lowest rental rates in the nation.

In one stunning indicator of the local market woes, Grubb & Ellis reported that the dollar volume of investment in metro Detroit’s industrial real estate market fell to $32.7 million in 2009, a drop of 95% from the $600 million invested the year before.