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
