A sophomore at the University of Memphis could open up an economics book and explain how the United States got to its current state through the laws of demand, diminishing returns and comparative advantage.

But that student couldn’t provide the best way for the nation to get out of it.

That’s the message Loren Scott, professor emeritus of economics at Louisiana State University, told a room full of brokers, bankers and appraisers at Wednesday, Feb. 8’s Commercial Property Forecast Summit, held at the Germantown Performing Arts Centre and sponsored by the Memphis Area Association of Realtors Commercial Council.

Scott, who gives 50 to 70 speeches a year on the state of the economy, addressed the nation’s more than 80-year business cycle and the issues that remain before the commercial real estate market turnaround – everything from national unemployment to health care reform to the budget debate and “anti-free trade.”

And leading up to November elections, the words “fair” and “balanced” will abound about distribution of income.

“Folks think they know the economy, but things are not always as they seem,” Scott said. “Find me any tax book that tells you to raise taxes in a weak economy.”

The nation has experienced the longest and deepest recession since the Great Depression, resulting in government declines for two years and CRE declines for three. To get back to full employment levels, Scott said, the nation needs to add 9 million jobs, or 250,000 a month by 2018.

It’s a concept Ron Kastner of CB Richard Ellis Memphis’ office division knows all too well. Calling 2011 “a bad hair day,” he said the common sentiment for the Memphis market is that the worst is in the rearview mirror for now, but leasing activity will be driven by facility obsolescence due to no new white-collar job growth.

Existing companies like FedEx Corp., International Paper and MAA are expanding, but the activity with 1,000- to 3,000-square-foot tenants is “where we’re very concerned,” Kastner said.

On the industrial front, Wyatt Aiken of Cushman & Wakefield/Commercial Advisors LLC addressed last year’s move-outs – including Cleo, Mazda North America and Treadways – but counteracted the bad news with top transactions like Trane U.S. Inc., Kimberly-Clark Corp., Newegg.com, Nike and Cummins Inc.

Several build-to-suit industrial projects occurred in 2011, including Anda Pharmaceuticals, Schulz Xtruded Products, Asics and McKesson Corp.

Last year’s investment activity was also fairly positive, with deals involving the Memphis Defense Depot, Diamond Comics, 4480 Swinnea Road and Trinity Ridge Business Center.

Moving forward, Aiken said while rental rates are flat, there’s still a “good pipeline” of deals in the market, including some speculative development by Industrial Developments International Inc. Memphis is also “back on the radar screen” for large institutions seeking investment properties.

But local retail continues to lag, said Josh Poag of Poag & McEwen. Last year’s sales in the sector reached only $90 million, the majority of which was thanks to Belz Enterprises shedding assets such as Park Place Centre.

However, Collierville’s The Avenue recently hit the market, and Poag expects increased transactional activity to continue in 2012.

Conversely, the best is yet to come for the multifamily market, said Eric Bolton of MAA, the Memphis-based REIT that saw rent increases in each of its 40 apartment markets last year compared to 2010.

“Weak employment conditions have created pent-up demand for apartment housing among rental age population,” Bolton said. “New supply outlook looks reasonable.”

For land, future activity depends on various external factors like food and gas prices and lifestyle choices, said Bob Turner of Southern Properties.

“We’re one of the most vacant cities in America, and that’s got to change before we see prices go back up,” Turner said.