No Commercial Real Estate Bubble

Toddi Gutner

Much has been written about the residential real estate bubble –in 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’t as personal and doesn’t 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’s wise to know what the market watchers are saying about the commercial markets.

To that end, a recently released Deloitte & Touche USA LLP report, “Real Estate Capital Markets: 2006 Industry Outlook & Top to Issues” 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?

Before it's here, it's on the Bloomberg Terminal.