The commercial real estate industry continues to show its investment durability as assets command attractive spreads over fixed-income investments and offer more stability than stocks.
San Francisco, CA (PRWEB) January 09, 2013
The results of PriceWaterhouseCooper’s Real Estate Investor Survey shows that commercial real estate has increasing promise for investors across every sector and in many cities across America. This is in line with the continuing recovery of the CRE industry and despite the continuing economic uncertainty in the U.S. and Europe.
“Commercial real estate in many markets has continued to improve as an investment alternative to stocks and bonds throughout 2012,” said Terry Robinson, President of The Off Market Association. “This has led not only to public deals, but to a large number of private deals. We expect this trend to continue in 2013, especially in non-core markets where off market deals are more plentiful”.
The new survey shows that investors in the office sector are still targeting prime assets in core markets, but an improving fundamental picture and aggressive pricing in the sector is leading more investors to non-core properties in the primary markets and core properties in strong secondary and tertiary markets. This shift is due in part to a greater acceptance on the part of investor to increased risk and slower growth.
“The commercial real estate industry continues to show its investment durability as assets command attractive spreads over fixed-income investments and offer more stability than stocks, while most property sectors continue to post occupancy gains and rental rate growth,” said Mitch Roschelle, partner, U.S. real estate advisory practice leader, PwC. “Foreign investors are particularly bullish on U.S. commercial real estate as they look for stable investments during uncertain times abroad. In 2013, Survey respondents expect to see an uptick in sales activity as property owners cull portfolios to take advantage of the low cap rate environment. And as investment capital continues its trend of matriculating beyond just apartments, cap rates are expected to compress across the entire asset class.”
The average overall cap rate in the fourth quarter showed a decrease in 24 of the 32 markets surveyed. 7 of the 32 markets saw cap rates remain firm and just 1 saw an increase in cap rates. Cap rates are the initial return that is expected from a property acquisition and reflects the anticipated ownership risk of the investment. The strongest declines in cap rate were seen in the warehouse sector and the tech office sector (San Francisco, Atlanta). The warehouse sectors drop of 40 basis points in the cap rate shows the optimism of most surveyed investors regarding the outlook for this sector.
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