Acuity Brands (AYI) is a $2.1B market cap company that specializes in lighting solutions for commercial real estate. In its earnings conference call earlier this month, the company expressed its concern over rising input costs and discussed the potential for passing these costs on to customers in order to maintain margins:
“We remain cautious about the potential for increases in material and component costs, and we will be as vigilant as possible in our pricing strategies to protect our margins and market position. Notwithstanding efforts to recoup higher costs, we anticipate pricing will continue to be competitive.”
AYI will be facing an unfavorable squeeze on pricing. The outcome will likely depend heavily on whether its competitors are willing to sacrifice margins to try to maintain market share.
Traders are betting that the real estate recovery is for real. Higher commercial and residential rents may be coming sooner than most people think.
The National Association of Realtors released its latest projections for commercial real estate. In this report, the NAR forecasts continued declines in rents across all segments of commercial real estate.
Here is the NAR’s breakdown for 2010 rent changes (followed by last year’s change in rent):
Office Market: -7.2% (2009: -12.7%)
Industrial Market: -9.6% (2009: -10.9%)
Retail Market: -2.4% (2009: -4.0%)
Multifamily Market: -3.4% (2009: -3.6%)