Commercial Real Estate Players Breathing a Little Easier as Economic Numbers Improve

Chicago, IL, June 3, 2013 - As the Dow broke a new record plowing

through the 15,000-mark, the economy certainly shows renewed signs of life

with the commercial realty sector as one of the main benefactors.   Nearly

every one is feeling better about the commercial markets, although many remain

guardedly optimistic about the recovery's strength.  Real estate capital

market focal points include:

*   Benchmark Indices:  As expected, improving Bull markets helped pushed

interest rates to higher levels by nearly 35 basis points.  By Memorial Day

ten-year treasuries broke through the 2%-barrier, not seen in more than a

year.  Five-year treasuries also bounced upward, hovering in the 1%-range.

Libor and prime float unchanged.

                                            

*   Cap Rates:  5% to 6% cap rates reflect credit-tenant properties with

longer leases of 10 years or more.  More typical urban properties

comfortably trade below 7%, while suburban assets and tertiary market

properties approach 8% or more.  "Yield creep" continues as the supply of

high-quality remains limited for commercial properties, forcing buyers to

search for deals in secondary locations with riskier cash flows.

*   Mortgage Rates:  Performing commercial properties are in strong demand

by lenders. Based upon ten-year permanent loans, mortgage spreads are in the

180 to 250 basis point range over treasuries, translating to interest rates

of approximately 3.75% to 4.5% -- still extremely low by any historical

standards.  Select retail, industrial and office properties, start at about

15 to 20 basis points more than multifamily assets. 

*   Leverage:  Due to the highly competitive costs of equity, many investors

are comfortable with 65% to 75% debt level in exchange for low interest

rates with prepayment flexibility.

*   New Construction:  With pricing peaking in nearly all commercial

property sectors, often approaching replacement cost levels, developers and

tenants find new construction more appealing.  In particular, tenants are

driven to high-density urban areas near public transportation.  Automobile

parking lots are shrinking, while bicycle racks grow. Lenders are responding

accordingly; life insurance companies are becoming more active with

construction - perm programs but are incredibly selective about the projects

and maintaining conservative leverage levels.

Jeanne Peck

Jeanne Peck, The Real Estate Capital Institute's director, insists, "It's an outstanding time to be a seller and an equally tough time to be a buyer.  Core and Core-Plus assets are priced to perfection, drivenby frightfully low interest rates."

:

The Real Estate Capital Institute(r) is a volunteer-based research

organization that tracks realty rates data for debt and equity yields.  The

Institute posts daily and historical benchmark rates including treasuries,

bank prime and LIBOR.  Furthermore, call the Real Estate Capital RateLine at

7RE-CAPITAL (773-227-4825) for hourly rate updates.

 For a complete copy of the company’s news release, please contact:

The   Real Estate Capital Institute(r)

3517 West Arthington Street

Chicago, Illinois USA 60624

Contact: Jeanne Peck, Executive Director

Mail to:director@reci.com

www.reci.com