While I have been cautionsly optimistic of late, it is clear that just as their seem to be two Americas politically, there are two commercial/investment real estate markets.
Some are calling it bifurcated -- a situation where the strongest values coming out of commercial real estate are on the coasts, think Los Angeles and New York. With everything else in between caught in a struggle.
Even here in Ohio, and in Central Ohio, you see areas with stronger values and others in a far weaker situation. For the most part, this area has stabilized. But the large institutional players are not coming here. They are looking at the largest markets only, and while flyover country investment opportunities might include the occasional Chicago property, but for the most part they are not interested in Middle America. Fanning the flames of concern that commercial property prices may not yet have stabilized (though that depends on the property itself, and the quality of hte tenants), are the Moody's Investment Services numbers. Moody’s Index is now 49 percent below the peak of October 2007, and at its lowest point in data going back to December 2000, according to this Bloomberg report. About 30% of the reported April transactions involved distressed real estate (which might be conservative; this is defined by Moody’s as only those assets where a known default, foreclosure proceeding or bankruptcy of the owner has occurred).
The seemingly never-ending flow of money for commercial properties of all types -- fully leased to creditworthy tenants, of course -- continues to flow. Among REITs, pension players and other institutional investors, prices are being bid up as each as a huge "war chest." with which to fund acquisitions. In fact, some properties have wound up being acquired after bidding wars.
The best approach, however, is still an analysis of a property's relative strengths and weaknesses. This can still be performed, and should be. While the pension funds have deep pockets and can afford to make a mistake, for my clients, a thorough analysis if a potential acquisition is the absolute best insurance one can have on have