Commercial Real Estate Investment Conditions Rise Across All Sectors

Apartments Remain Strong and Industrial Gains Stream According to New CCIM Institute and RERC Data.

Investment conditions ratings rose for all commercial real estate property sectors at the end of 2011, according to CCIM Institute and Real Estate Research Corp.'s 1Q12 RERC/CCIM Investment Trends Quarterly. “CCIM members gave apartments their highest rating at 7.5 percent on a scale of 1 to 10, with 10 being high. This is a very solid rating, and investors will find it hard to go wrong with this property type, given pent-up demand for new household formation,” said Kenneth P. Riggs Jr., CCIM, CRE, MAI, chief real estate economist for the CCIM Institute and chairman and president of Real Estate Research Corp.

From a value versus price perspective, the industrial sector received the highest rating from CCIM members, followed closely by the apartment and office sectors. “For investors looking beyond apartments, the industrial sector is gaining steam,” Riggs said. “The investment conditions rating is up over 3Q11, along with both the risk versus return rating and the value versus price rating for this property type.” However, Riggs recommends using caution with pricing for the industrial sector. “Our transaction analysis shows aggregate pricing is mostly flat,” he noted.

Despite concerns about repercussions from the European debt crisis, the still-stagnant U.S. housing market, and the federal deficit, overall optimism for the U.S. economy is increasing among CCIM members, according to the report. Positive signs that the U.S. economic recovery will continue include solid GDP growth, a decline in unemployment, and an uptick in manufacturing, Riggs said. In addition, CCIM members increased their ratings for regional economies in the East, Midwest, and South.

CCIM members also increased their ratings for stocks and bonds in 4Q11, an improvement over all three previous quarters last year. “It's no surprise that as stock market returns increase, investment survey respondents are moving out on the risk spectrum and increasing their ratings for stocks and bonds. We are all hungry for higher returns, and it looks like the stock market is where you can get them right now,” Riggs said. “However, long-term investors who are more risk averse may still prefer commercial real estate over other investment alternatives.”

Read the entire 1Q12 RERC/CCIM Investment Trends Quarterly report.

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Contact: Olivia Baeza Gellman, pr@ccim.com.

About the Survey: Published quarterly, the RERC/CCIM Investment Trends Quarterly report provides timely insight into transaction volume, pricing, and capitalization rates for the core income-producing properties. The RERC/CCIM Investment Trends Quarterly is produced by the Chicago-based Real Estate Research Corp. in association with and for members of the Chicago-based CCIM Institute.

 

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