Commercial Real Estate Investors Have Recovery in Sight

By
Real Estate Agent with Palatium Auction and Appraisal Service, Real Estate Auctions, Estate, Moving, Downsizing Auctions 618-233-1000 USPAP Appraisals proesch@ptauctions.net

For the first time in two years, commercial real estate investors are expressing a renewed sense of optimism about the future. Based on their responses to a quarterly survey conducted by PricewaterhouseCoopers, investorsbelieve the worst has passed and a commercial real estate recovery is on the horizon, although they acknowledge that challenges do still exist.

“Following the onset of the recession and the credit crisis, underlying fundamentals were deteriorating and overall cap rates were expanding simultaneously and quickly, causing values to plummet,” said Susan Smith, director, real estate advisory practice, PricewaterhouseCoopers, and editor-in-chief of the survey. “The worst seems to be over, according to survey participants, as investors suggest that the bottom is near, if not here, particularly for better-positioned markets and assets.”

Based on the findings of the first quarter 2010 PricewaterhouseCoopers’ Korpacz Real Estate Investor Survey released this week, investors believe that owners and lenders are finally coming to grips with what assets are truly worth. As a result, the report finds that while 2010 is expected to be a slow year for sales activity by historical comparison, there could be marked improvement from 2009, as banks appear more willing to lend even though underwriting will remain extremely conservative and more equity will be required to secure debt.

“There is a tremendous amount of capital seeking real estate opportunities, and now is still a great time to buy,” Smith said. “Many investors in our survey still anticipate

incurable deleveraging issues on the part of both lenders and owners to provide opportunities to acquire quality assets at below-peak pricing, and there’s strong competition among buyers for such deals, as investors indicate increasing activity with both the number of bids and good offers.”

According to the report, looming debt maturities remain a top-of-mind issue among surveyed investors, who believe the out-of-balance loans coming due over the near term will present major hurdles for owners and lenders. Smith says that while the industry is looking to lenders and special servicers of commercial mortgage-backed securities (CMBS) to provide forced sales, some investors believe that more distressed selling will likely come from borrowers, who are more comfortable with where the market is now and will accept a loss in order to move on.

Surveyed investors anticipate vacancy rates to continue to increase in the coming year but not as steeply as the prior year. In addition, they foresee rental rates continuing to decline in most markets, but to lesser degrees, as property visits and tenant interest show slight improvements across the country.

As weak tenant demand lingers, investors surveyed indicate an increasing need to offer prospective tenants free rent during lease negotiations. Overall, just over 91 percent of surveyed investors reported the use of free rent. Last year, this survey figure was 84 percent. Office markets where survey investors report the highest levels of free rent over an average seven-year term include Phoenix (up to 24 months), Atlanta and Chicago (up to 18 months), and Dallas (up to 15 months). Lower levels are noted for San Diego (up to 6 months) and Los Angeles and Denver (up to 7 months).

Investors are expecting the apartment sector to continue to lead the recovery as value losses have been almost fully recognized, and some multifamily assets are actually showing slight value increases.

The warehouse sector remains weak, according to survey participants, due to an overall lack of demand for goods, while the office and retail sectors continue to struggle as both economy and employment challenges persist.

Read the Story

Posted by

Paul
Paul Roesch
Realtor, Auctioneer, CAI, AARE, CES, GPPA, ATS
Marketing Director 
Certified Distressed Property Expert, CDPE
618-407-8479 cell
proesch@ptauctions.net

 Add me as a Friend on Facebook Paul M. Roesch                                                                        

Free Sign Bidder Early Bird Notification of Upcoming Auctions

Auctionitnow  Father Time Auctions St Louis MO

All original text, video, and photo content is the exclusive property of Paul Roesch and / or Palatium Auctions (the Company) and may not be used without expressed written permission. All information deemed reliable but not guaranteed. All personal, real and intellectual property is subject to prior sale, change or withdrawal. Neither the Company or information provider(s) shall be responsible for any typographical errors, misinformation, and misprints and shall be held totally harmless. Listing(s) information is provided for consumers personal, non-commercial use and may not be used for any purpose other than to identify prospective properties consumers may be interested in purchasing. The Company has no control over the quality, safety or legality of the Auction Items listed, the truth or accuracy of the listings or any other information provided by Sellers about the Items. Listings may be sold, withdrawn at any time or subject to change without notice.

close

Re-Blogged 1 time:

Re-Blogged By Re-Blogged At
  1. Geoff ONeill 03/22/2010 04:42 PM
Topic:
ActiveRain Community
Location:
Missouri Saint Louis County
Tags:
father time real estate auctions
missouri real estate auctioneer paul roesch
commerical real estate auctions

Post a Comment
Spam prevention
Spam prevention
Show All Comments
Rainer
255,116
Geoff ONeill
John L. Scott Medford - Medford, OR

I like that "Banks appear more willing to lend"  This would be a first step.

Mar 21, 2010 01:33 PM #1
Post a Comment
Spam prevention
Show All Comments

What's the reason you're reporting this blog entry?

Are you sure you want to report this blog entry as spam?

Rainmaker
416,275

Paul Roesch CDPE 618-233-1000

Real Estate Auctioneer CAI St Louis MO Auctions
How Does an Auction Work
*
*
*
*
Spam prevention

Additional Information