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| Jeanne Peck |
Chicago, IL – Real Estate Capital Institute reports Good
News Bears stomp out Bad News Bulls,
as investors now worry about how good times keep getting
better.
Rates are still low, but investors
grow increasingly skeptical such trends will continue, including the following:
* "Cap Rates
are not capped" - Dipping below 5% for credit-tenant
properties and core assets is no longer impossible. Low mortgage ranges
along with insatiable appetites for all type of
cash-flowing commercial real
estate drive record-high pricing, even above 2006-2007
levels. 1031X buyers
prevail for smaller deals, while institutional players
try to expand more
into urban-infill assets, where product availability is scarce. Less
pricing differential for primary vs. secondary markets,
as long as asset
quality and store sales performance [e.g., retail]
reflect solid results.
Astute owners are pruning their portfolios, mainly
selling assets in
smaller, less strategic markets to take advantage of
current risk-pricing
dislocation.
* "Flat
spreads" - As commercial property
markets steadily improve with
the retail sector leading the way, mortgage spreads
between various property
types flatten out.
Overall spreads start as low as 120 basis points over
comparable-term treasuries for low leverage loans (below
50% LTV); 150-170
basis points for moderate leverage (65% LTV) and under
220 basis points for
full leverage loans (75% LTV). With rates remaining in comparatively low
ranges over the past few years, more owners comfortably
stay with
floating-rate debt.
As with equity markets, little pricing differentiation
for mortgage rates in primary vs. secondary markets.
*
"Replacement costs count" - Peaking property values ignite
more new
construction demand:
More and more, cost-equals-value formulas drive
investment decisions. Developers and tenants find new
construction more
appealing. In
particular, users are driven to high-density urban areas near
public transportation.
Automobile parking lots are shrinking, while bicycle
racks grow.
Jeanne Peck of
the Real Estate Capital Institute(r), suggests, "The party
continues as owners and sellers enjoy the best capital
market ride in years.
When will the music stop?
No one knows for sure, but why worry -- just go
with the flow!"
For a complete
copy of the company’s news release, please contact:
Jeanne Peck, Executive Director
www.reci.com
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