Commercial Real Estate: Outlook at the Power Breakfast
A GOOD OUTLOOK FOR COMMERCIAL REAL ESTATE IN 2007
I had the opportunity to sit in at the International Council of Shopping Centers (ICSC) annual "Power Breakfast" that featured some high powered institutional investors as panelists. They included Erwin Aullis, the Managing Director of Transwestern Investment Company, Stanley L. Iezman, the President of American Realty Advisors, Inc., and Glen Sonnenberg, the President of Legg Mason Real Estate Services. The panel was moderated by Mark Schurgin, the president of the Fesitval Companies.
These are some high-powered commercial real estate fund managers who don't even get out of bed for a deal less than $50 Million! They were there to give us some of their thoughts on how the economy will impact commercial real estate investment, where interest rates might be headed in the coming year, and how buying and selling parameters have changed for shopping center owners.
Some of the thoughts that came from these guys were fairly insightful. Here's what I got from the breakfast that I think you'll find interesting:Commercial real estate lenders are awash in money thanks to Collateralized Debt Obligations. These are derivative debt instruments that allow lenders to dramatically increase their ability to raise money at low overall costs. The ageing of the population and the retirement of the Baby Boomers means that there is a large chunk of retirement money looking for alternate income opportunities … think "income property." Large funds are taking on more real estate, making it a legitimate "investment class" like stocks and bonds. The REIT Index was up 35% last year, trouncing the S&P 500.Large urban areas can expect low cap rates in the months ahead, meaning that there are opportunities in secondary areas, but you still need to beware in "tertiary" markets, like Detroit and St. Louis. Oversupply of commercial properties is not yet in evidence.1031/Tenants-In-Common buyers are drying up, slowing price appreciation. "A" quality commercial properties are becoming "commoditized," meaning that there are real opportunities in "B" and "C" product. The big players are getting out of condominium product at significant discounts to original asking price (which means you might get a nice home for cheap). This was in evidence in San Diego and South Florida. Residential projects are taking a back seat to commercial in the minds of the big investors.
There's some good intelligence in these observations for anyone serious about investing in commercial property this year.
The final few minutes of the session were devoted to a group consensus on where interest rates and cap rates would be a year from now. While not a real prediction, the sense of the room was that the Prime Rate would be .75% to 1% lower, commercial mortgage rates for "A" product would be about .25% to .5% higher than today, and cap rates for class "A" properties would be essentially unchanged.
My conclusions are that there will be some opportunities to make money in smaller commercial properties in outlying areas and smaller urban markets. New construction and other "value added" projects should also do well. One caveat is do not make the mistake that rents will continue to trend upward, though. Stay conservative in your projections and you should be able to ride out any recession that might follow in the wake of possible Congressional tax hikes.
Related Tags: estate, real, power, commercial, breakfast, outlook, at, the
WANT TO USE THIS ARTICLE IN YOUR E-ZINE OR WEB SITE? You can, as long as you include this complete statement with it: 'Craig Higdon, "The Investment Property Insider," works as a commercial mortgage broker. He publishes the weekly "Investment Property Insider" e-zine and blog, www.InvestmentPropertyInsider.com. Visit the blog and get a complimentary report on commercial financing techniques.'Your Article Search Directory : Find in Articles
Recent articles in this category:
- The Secrets to Getting Low Down Payment Car Insurance
Upon purchase of a new car, there is almost always a requirement to buy an auto insurance policy as
- The Wisdom Behind Auto Insurance Comparison Quotes
No one in his right mind would not go for a good deal. In fact, everyone is out on their feet and ru
- The Benefits of Auto Insurance Comparisons Florida
Insurance can be expensive. This is something everyone knows about especially in the sunny state of
- Auto Insurance Florida: The No-Fault Policy
There are different kinds of car insurance offered by a wide range of providers today. Different sta
- Finding the Cheapest Auto Insurance Companies
Everyone is asking and searching for the cheapest auto insurance companies available today. Consider
- How do You Compare Private Health Insurance Cover in Australia?
Deciding what is the best and most affordable private health insurance cover can be easy if you take
- How Payment Protection Insurance Was Mis-Sold
For over six years the issue of Payment Protection Insurance (PPI) and how it was mis-sold to custom
- Finding Quotes For Auto Insurance Online
One of the many concerns when you are shopping for auto insurance is being able to get access to quo
- How You Can Find the Best Auto Insurance Online
When it comes to renewing your car insurance you are going to quickly discover that there are a numb
- Guidelines For Searching For Auto Insurance Online
The internet can be a great source of discounts and values related to auto insurance. However, many
Most viewed articles in this category:
- Trading Forex With Pivot Points
Forex Pivot Point Trading are used today by Forex Traders and are calculated on the previous days mo
- Where To Search For Free Grants
Where do you look for free grants? The search must be thorough or it could be an exercise in futilit
- The Connection Between High Blood Pressure and Salt
We are a society of Salt Addicts. It cannot be denied. When you look at the things we do and the pla
- Tips For Avoiding HYIP Scams
Before knowing about HYIP Scams, refer to the functioning of HYIP or "High Yield Investment Programs
- Getting Credit After Bankruptcy
Consumers do not have to live sans credit following a bankruptcy. By following certain steps consume
- Tips For Choosing A Credit Card
Are you looking for that perfect credit card? If so, you may be confused about what exactly to look
- Cheap Car Insurance For Teens Online
Many elements determine a car insurance policy. Car insurance companies look at the person's age, hi
- What Exactly Is Free Grant Money?
You can apply for free grant money from various government agencies. But where exactly does this mon
- Small Business Owners Marketing and Customer Service
Marketing can be time-consuming, but it doesn't have to be hugely expensive now, thanks to the Inter
- Apply Online For A Credit Card - How To Choose A Card?
The best type of credit card for you will be dependant on how you intend to use the credit card. Are