Monday, June 3, 2013

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

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