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Archive for Real Estate Recovery

Per Apartment Realty Advisors, “The markets are now virtually unanimous in announcing the apartment recovery.”

Effective rents are up or not changed in all markets and occupancies have risen in 73% of the markets ARA monitors when compared to last quarter. Just 15 months ago they reported that “23 out of 24 markets had decreasing effective rents” and “occupancies are unchanged.” 

“Existing product offered for sale is bringing many, many qualified offers. More buyers are focused on Year 3 cap rates rather than a going-in target; sort of a replacement for the rent trending dinosaur. Developers, often public REITs with owned land, are targeting new construction in markets like NY, DC and Southern California where acquisition discounts to replacement cost are disappearing.”

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How far have commercial real estate values recovered?

Green Street are widely respected for their in-depth market knowledge. They believe that Buyers and Sellers of commercial property are striking handshakes at prices that are substantially above the current deals that are closing.

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REITs are a surprising bright spot for investors.

The “Traded” REITs referred to in this article have generated stock growth over the past year, as well as current income to investors. The key point made by the article is that the real estate market was not “over built” during this last cycle as a result of construction costs.  Vacancies are up, however, and rental rates are down. Even though investor sentiment is positive, real estate fundamentals have a way to go. When investing in a REIT, one should also look carefully at their strategy, legacy assets (those that they acquired during the height of the cycle), and the composition of their portfolio.

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Insurance companies comment on the real estate road to recovery

Life Insurance companies have always been involved in commercial real estate financing. They supply the leverage to many borrows and this article gives you a sense of their acumen in doing so as they have not suffered as significantly as other lenders.  The key comment to focus upon is that they are back lending as they have raised significant capital, and like today’s valuations. This means that they don’t see significant down side risk to today’s market valuations. Given their track record through this economic crises, they may be right. 

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