News
Are we Seeing Signs of Life in Commercial Real Estate?
April 05, 2010
I restate the familiar saying, "We are cautiously optimistic."
Through my recent conversations with some of the largest real estate owners and buyers in the United States, I am now seeing encouraging signs of activity. Why? Well in my opinion, the reasons are as follows; 1)cash has been building on the sidelines for quite some time, 2)prices have fallen to a level where investment returns, and the associated risk, are meeting corporate underwriting requirements, and 3)recent news reports are touting the potential bottoming of the recession.
Commercial real estate investments are made by many types of buyers. The activity I am seeing is primarily by the highest quality buyers such as REITs, insurance companies, and cash rich, experienced parties capable of acting with precision and skill. What I am not seeing is commercial real estate buyers of yester-year who blindly walked in to the fire with little prior experience and praises of the power of leverage. Those guys are still gone for a while.
Be cautious for now, even if you have the ability to purchase. Be selective, for there will be ample opportunity over the coming year. There is still rent roll risk as we, in my opinion, have yet to see all of the failures yet to come. I venture to say there will be quick pressure on interest rates, if in fact, many more concure on the upward trends of the economy. That may well be another significant reason to consider re-entering the market; or not to... Should rates rise, it may well increase pressure on owners at just the moment they need every dime they can achieve.
Be smart, but act.
