Santa Monica, California (PressExposure) December 08, 2009 -- Is it time to invest in commercial real estate again? Put simply, it depends.
Investors waiting for the "blood-in-the-streets" pricing of the Resolution Trust Corp. days of the early 1990s will likely be disappointed by a different type of investment environment. Indeed, the current environment is unprecedented in the US and must be analyzed on its own merits.
One, if not the most important, difference is the US governmentâs actions. In the 1990s the government response for commercial real estate distress was to foreclose and dispose. This approach cost tax payers billions of dollars and created havoc in the market. While there is distress in todays market the governmentâs methods are much different and thus creating new and different buy signals.
An example would be the new revised FDIC policy that allows banks to retain loans on their books that are worth less than their debt provided that borrowers continue to service the debt. This change in policy places a governor on further drastic price declines for healthy cash flowing properties.
This new FDIC policy further differentiates the economic vulnerability and strengths of different types of commercial real estate. For example the short term nature of Hospitality tenancy creates a disproportionate amount of risk when compared to the long term tenant commitments found in NNN net lease properties.
To date poor market conditions and distressed properties have colored investorâs views and market values of all property types creating a potential buying opportunity for well performing assets.
While other commercial real estate assets continue to struggle; activity for credit tenant NNN properties has increased due to their consistent, predictable performance. Attractive asking capitalization rates caused by overall negative market sentiment, a narrowing of the bid/ask ratio, more realistic investor risk premium requirements and plentiful cash appear to be bringing the NNN property market back to life.
This is reflected in the most recent survey by TM 1031 Exchange Inc. for NNN properties. Their latest survey for NNN properties shows the capitalizations rates down from the July 2009 peak of 8.47% but still hovering above their historical levels.
TM 1031 Exchangeâs surveys focus on the critical time between offering and acceptance to capture real time market activity. This provides their clients with an important strategic advantage over conventional market gages and indexes.
TM 1031 Exchange Inc also reported a mild uptick in NNN property activity with more properties both going under contract and closing. The combination of increased activity and well above average capitalization rates points to the possible first signs of significant buying opportunities which in the end will lead to a recovering commercial real estate market.
The timing for the recovery in the commercial real estate market will vary by property type, future economic/employment shifts and government actions.
By carefully watching the signs for the bottom of the market for any particular property type and acting accordingly astute investors will be able to live the old adage of âbuying their straw hats in winter.â
For graphs and surveys on other types of commercial real estate properties contact TM 1031 Exchange Inc. at firstname.lastname@example.org or call 1.877.486.1031 (USA) or 001.310.264.0497 (International). TM 1031 Exchange Inc. is a leading provider of commercial real estate services specializing in1031 exchanges
Contact Tim Marshall at TM 1031 Exchange Inc. with further questions/comments. http://www.tm1031exchange.com/