I am cautiously optimistic, and feel that 2011 is still going to be rough sledding for many sectors of the commercial/investment real estate market. Still, there are opportunities out there for both buyers and sellers, as long as both parties are realistic.
As I have written before, multi-unit housing has generally stayed strong. Some markets this has not been the case, but in most areas and for a myriad of reasons multifamily has been stable or better economically. And now, more institutional validation of the same.
Multifamily Biz magazine says the recovery has started, referencing a study by NAI Global. I believe the market has stabilized somewhat but, as I have stated repeatedly, we are not out of the woods yet. There are NUMEROUS hurdles yet, and PCRE colleague Greg Will -- at an economics luncheon yesterday -- reported back that that same pessimism remains among knowledgable practioners. Repeating: there are many, many opportunities out there. But, we've got some bumps, curves and obstacles to get past before things are rosy, pretty, and tied up in pink ribbons (with pink ponies and unicorns prancing in the background).
No fairy tale, the commercial/investment real estate market is a rollercoaster right now -- an E-ticket ride you might say.
Still, please take a moment to read the article from Multifamily Biz. Worth the effort.
Wednesday, January 5, 2011
Monday, January 3, 2011
Happy New Year!
Back in the office and hitting the ground running. Optimistic about a healthy and prosperous new year for everyone!
Thursday, December 30, 2010
Things Are Looking Up
Just had lunch with a colleague from Chase Bank. He told me that his group lent way over their budgeted (read: expected) lending cap for 2010. Major markets were California, Indiana and -- get this -- Michigan. Even those areas with bad economies are seeing things come chugging back.
Sure, underwriting terms are more strict, but business is getting done and money is being lent. It is too easy to stand around and blame the banks for not lending money when there are other reasons certain projects don't obtain funding.
This news, mixed with reports that commercial real estate values are rising, is super news. In 2010 we did not see a huge drop. In 2008 and 2009 (truly starting at the end of 2007), we saw a 40 percent drop in values overall across the U.S. We have seen increases in prices in top markets across America. Pricing may well have bottomed, but we still have yet to see what is coming in 2011. There are reports that banks are going to dump some product next year. Time will tell.
There will be a broadening of buying in 2011, as REITs kick loose funds they are overloaded with, cash-heavy investors come into Class B and Class C products, and distressed assets. Some are calling the trend a "gradual thawing" of lending. Again, my conversation with my colleague from Chase (he works in a major operations center here in Central Ohio) indicated that even the most conservative of banks -- Chase is one of these -- are starting to push more money out the door.
CNBC's Closing Bell had a discussion of commercial real estate values a few days ago. It is definitely worth watching.
Even multifamily which stayed fairly stable was hit in 2008 and 2009, and values remain below where they might have been. Still, they are in stronger shape than commercial buildings, industrial and other segments.
Trophy assets, according to the guys on CNBC, those properties of $10 million and over -- in the top half dozen markets in the U.S. -- were up some 40 percent in value.
Further, National Real Estate Investor is saying similar things. That fundamentals are improving. Manufacturing expanded for the 16th straight month in the U.S., even though jobless figures havn't budged much. In addition, investors flat out are expecting stronger performance from the economy, as evidenced by 10 year treasury yield reversed a year long decline. This is a critical benchmark for commercial real estate lending.
Things just may be improving. My only concern is inflation. There will be a broadening of the buying appetite and interest rates continue to remain low. But what of the money supply that we are cranking out and how that impacts acquisitions? Current owners are going to see benefits. Those who aren't in yet may be impacted by inflation if they wait another year.
More to come....
Sure, underwriting terms are more strict, but business is getting done and money is being lent. It is too easy to stand around and blame the banks for not lending money when there are other reasons certain projects don't obtain funding.
This news, mixed with reports that commercial real estate values are rising, is super news. In 2010 we did not see a huge drop. In 2008 and 2009 (truly starting at the end of 2007), we saw a 40 percent drop in values overall across the U.S. We have seen increases in prices in top markets across America. Pricing may well have bottomed, but we still have yet to see what is coming in 2011. There are reports that banks are going to dump some product next year. Time will tell.
There will be a broadening of buying in 2011, as REITs kick loose funds they are overloaded with, cash-heavy investors come into Class B and Class C products, and distressed assets. Some are calling the trend a "gradual thawing" of lending. Again, my conversation with my colleague from Chase (he works in a major operations center here in Central Ohio) indicated that even the most conservative of banks -- Chase is one of these -- are starting to push more money out the door.
CNBC's Closing Bell had a discussion of commercial real estate values a few days ago. It is definitely worth watching.
Even multifamily which stayed fairly stable was hit in 2008 and 2009, and values remain below where they might have been. Still, they are in stronger shape than commercial buildings, industrial and other segments.
Trophy assets, according to the guys on CNBC, those properties of $10 million and over -- in the top half dozen markets in the U.S. -- were up some 40 percent in value.
Further, National Real Estate Investor is saying similar things. That fundamentals are improving. Manufacturing expanded for the 16th straight month in the U.S., even though jobless figures havn't budged much. In addition, investors flat out are expecting stronger performance from the economy, as evidenced by 10 year treasury yield reversed a year long decline. This is a critical benchmark for commercial real estate lending.
Things just may be improving. My only concern is inflation. There will be a broadening of the buying appetite and interest rates continue to remain low. But what of the money supply that we are cranking out and how that impacts acquisitions? Current owners are going to see benefits. Those who aren't in yet may be impacted by inflation if they wait another year.
More to come....
Saturday, December 25, 2010
Friday, December 24, 2010
Warning Signs
PCRE colleague Tim Mehan has penned a very good piece on the many warning signs of the problems within our economy. Specifically, the looming inflation that the government denies is either here or around the corner, and yet all the signs are there.
Drop in at Tim's Ohio Industrial Real Estate Blog and ponder why bond values are crashing and how inflation is going to boost commercial/investment real estate values.
Very nicely written.
Drop in at Tim's Ohio Industrial Real Estate Blog and ponder why bond values are crashing and how inflation is going to boost commercial/investment real estate values.
Very nicely written.
Tuesday, December 21, 2010
In The End, New Tax Bill Helps Investors
The tax bill signed by President Obama will be a boon to commercial/investment real estate. No question about it.
Though it could have been better (re-instating the death tax was clearly a mistake in my opinion), the moves will help quell the near-term fears of many business people, will spur more jobs and physical plant investment, and more. Among the better decisions: not messing with capital gains taxes and extending the 15-year depreciation for qualified leasehold improvements.
Plus, by cutting Social Security payroll taxes and estending jobless benefits, along with mortgage insurance deduction, people will have more money in their pockets. Thus, increased consumer spending will benefit retailers, which will help the retail real estate market and eventually, industrial real estate. Maybe yes, maybe no. An interesting theory. Everything put together does trend toward the positive, though.
I'm not alone in my assessment. In a Globe Street article, Dennis Heskey, senior adviser at AlixPartners, says leaving the capital gains taxes the same rate through 2012 helps the REIT market. REIT investments are a dividend play and this has the potential to help the REIT market, he says.
Adds Harvey Berenson, managing director in the Business Tax Advisory group at FTI Schonbraun McCann Group in New York City, says the extention of the 15-year depreciation for qualified leasehold improvements will encourage investment in rental property.
Overall, there is less uncertainty. There still are other problems looming, but uncertainty about tax implications -- at least for the next 24 month -- helps lessen fears of investors overall. And as Martha Stewart might say, that's a good thing.
Though it could have been better (re-instating the death tax was clearly a mistake in my opinion), the moves will help quell the near-term fears of many business people, will spur more jobs and physical plant investment, and more. Among the better decisions: not messing with capital gains taxes and extending the 15-year depreciation for qualified leasehold improvements.
Plus, by cutting Social Security payroll taxes and estending jobless benefits, along with mortgage insurance deduction, people will have more money in their pockets. Thus, increased consumer spending will benefit retailers, which will help the retail real estate market and eventually, industrial real estate. Maybe yes, maybe no. An interesting theory. Everything put together does trend toward the positive, though.
I'm not alone in my assessment. In a Globe Street article, Dennis Heskey, senior adviser at AlixPartners, says leaving the capital gains taxes the same rate through 2012 helps the REIT market. REIT investments are a dividend play and this has the potential to help the REIT market, he says.
Adds Harvey Berenson, managing director in the Business Tax Advisory group at FTI Schonbraun McCann Group in New York City, says the extention of the 15-year depreciation for qualified leasehold improvements will encourage investment in rental property.
Overall, there is less uncertainty. There still are other problems looming, but uncertainty about tax implications -- at least for the next 24 month -- helps lessen fears of investors overall. And as Martha Stewart might say, that's a good thing.
Friday, December 17, 2010
House Passes Tax Package
Unlike how it is being presented by much of the media, the U.S. House of Representatives sometime in the middle of the night last night passed an extensive tax bill, which continues the existing tax rates for all Americans for the next two years.
After more than a week of fierce debate the majority voted against increasing taxes.
In the bill, the estate tax, more commonly known as the "death tax," has been reinstated, but at a lower rate than confiscatory bureaucrats had hoped for. Also, there are a number of provisions that allow businesses to take up to 100 percent depreciation on various property categories (equipment, etc.) in order to stimulate production and hiring.
There will be more to come . . .
After more than a week of fierce debate the majority voted against increasing taxes.
In the bill, the estate tax, more commonly known as the "death tax," has been reinstated, but at a lower rate than confiscatory bureaucrats had hoped for. Also, there are a number of provisions that allow businesses to take up to 100 percent depreciation on various property categories (equipment, etc.) in order to stimulate production and hiring.
There will be more to come . . .
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