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February 21, 2006
No Commercial Real Estate Bubble
Much has been written about the residential real estate bubble ??n fact, entire blogs are dedicated to the topic (thehousingbubble2 and economicrot).
Commercial real estate is a much less popular subject, in part, because it isn?? as personal and doesn?? tug at our own financial purse strings. Still, if you're (still) interested in investing in real estate investment trusts or funding developments with your own private equity, it?? wise to know what the market watchers are saying about the commercial markets.
To that end, a recently released Deloitte & Touche USA LLP report, ??eal Estate Capital Markets: 2006 Industry Outlook & Top to Issues?/a> predicts that commercial real estate does not have a bubble to burst.
“While most of the focus has been on the residential real estate bubble, commercial real estate sits at the other end of the spectrum,” said the report’s author, Dennis Yeskey, a principal with Deloitte Financial Advisory Services LLP and leader of the organization’s real estate capital markets practice. “We are in the twelfth year of a substantial real estate rally that, with very few exceptions, has produced an extended and record up-cycle for real estate. Commercial real estate has offered investors an attractive combination of steady returns and low volatility compared both to stocks and bonds, especially over the last five years— and this is something that should continue this year.” Do you agree?
Investing in Real Estate
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Of course there is a Commercial Real Estate Bubble - Bubbles are created by monetary polices that reduce the cost of borrowing money - making it CHEAP to risk other peoples money on building yet another Office Building.
Look arouind your hometown - you'll see new buildings going up faster than ever.
Posted by: Bill at February 23, 2006 09:35 AM
I have been in commercial real estate in Southern California since 1978. I have seen bubbles and foreclosures. Have been on both ends of the spectrum, but these prices out here are way to high.
Income expectations or lack of them , have always been for breakeven to low returns in cashflow for the better located and better conditioned properties. So to answer the question is i dont see a bulble, as long as rates remain where they are or a little higher. Prices could fluctuate 15% i feel at the most. Its hard to be a buyer today!!
Posted by: harvey goldsmith at February 23, 2006 02:58 PM
no real estate bubble??? where did that come from? i invest now and again in commercial real estate and thought i'd better say something; while i agree that commercial gives better returns over the long run than residential, you still have overpriced properties and possibility of prices dropping. remember that part of the equation for commercial real estate is the value of the land. and that my friends is subject to the same forces that more residential property up and down, albeit with less impact.
Posted by: realestateshark at August 9, 2006 02:09 AM