Market
Report
The Real Estate Industry, Though Volatile, Offers Riches to Those
Who Know Where to Look
"While many Americans are worried that real estate prices have flattened and may even turn downward,
some of the country's top commercial developers say there always is opportunity for those
who manage their projects
efficiently in a global market, focus on areas with growing demand and have the staying power to wait out the downturns.
"'After record growth in 2006, how does the commercial market look today?'
"Let's just hang on and hope these times continue," said William L. Mack,
referring to the current era of low-interest rates, rising rents and soaring
real estate investment. Mack is managing partner of Apollo Real Estate
Advisors, a New York-based real estate firm with office, retail, hotel and
other projects in 20 countries.
"Investing in commercial real estate hit a record $306.8 billion in 2006,
up from $276 billion the year before, according to the National Association
of Realtors. The NAR says the market may level off this year, with vacancy
rates edging up and rent increases slowing as the market absorbs new space.
But there is little reason to think a serious downturn is imminent.
'The
bubble really didn't happen,' said Jeffrey S. Katz, CEO of Sherwood
Equities, a major developer of the Times Square area in New York City.
'The
market is not frantic.'"
[Source:
Knowledge@Wharton May 2, 2007.]
"Is Commercial Property Still a Good Investment?"
"These are blissful times for
commercial real estate investors. Having fallen into a deep slump with the
ending of the Internet boom, the market has come surging back. In 2004 alone,
prices rose 26% for apartment complexes, 21% for industrial properties, 14% for
retail properties and 6% for office buildings, according to Real Capital
Analytics, a New York real estate research firm. At the same time, however, a
number of major institutional and private investors have been selling off large
chunks of their portfolios of prime commercial real estate and putting the sale
proceeds into less expensive real estate or into other assets entirely. Wharton
experts and others look at real estate's revival as well as its risks. "
[Source: Knowledge@Wharton. July
13-26, 2005.
http://knowledge.wharton.upenn.edu/article/1241.cfm]
Commercial Real Estate and
the Economy
"A decade ago, a troubled
real-estate sector actually led the nation into recession;
billions of dollars of bad loans made to office-building
developers led to bank failures and crimped new lending. Credit
problems in the real-estate industry this time are much less
severe. Equity levels are higher, and lower interest rates are
making up for lost rental revenue for the many properties that
have floating-rate debt. Standard & Poor's, which tracks $108
billion in rated commercial loans, says the delinquency rate was
2% at the end of January, up from 1.21% at the end of the third
quarter of 2001. That's a far cry from the early 1990s, when bad
loans amounted to more than 7% of the total.
"But chances are growing that
real-estate problems could spill over into the broader economy.
S&P projects the delinquency rate will be between 3% and 4% by
the end of the year. Likewise, commercial construction is slowing
dramatically. About $65 billion of work is expected to start in
2002, compared with $81 billion in 2000, the peak year of the last
cycle, according to F.W. Dodge, a building-research division of
McGraw-Hill Cos."
[Source: "Commercial Real
Estate May Damp the Economy". The Outlook. The Wall Street
Journal. February 25, 2001. In The
Wall Street Journal.]
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