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November 21, 2005
Sam Zell's favorite markets
Last week I heard famed real estate investor Sam Zell speak at an investment conference. Much of the discussion was about his investments in single family housing in Mexico and his worries about investing in India and China.
He also reeled off his favorite U.S. markets (I assume he was referring to the commercial real estate markets). They were:
suburban San Francisco (other than Silicon Valley)
In general, he was optimistic about U.S. real estate market, noting there is plenty of cash to invest and it still costs so much more to build a new office building than it does to buy one that there is room for more gains.
"In my 40 years in real estate, I've found there is only one metric that matters -- replacement cost." He says the spread between a building's replacement cost and its economic value is as wide today as it was in 1993 -- mainly because the cost of construction has increased.
He admitted that like most real estate investors he's always optimistic. "In every market and in every situation there is opportunity," Zell said.
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