CRE Report for 08.01.2011 – Real Estate Cycle Snapshot

Market Snapshot

Bob – Walt, you mentioned Stephen Duffy from Moss Adams spoke last Monday at the NAIOP meeting.  Did he have some interesting news on the commercial real estate front?

Walt – Good morning Bob, it was an interesting and enlightening talk.

He discussed how there is a tale of two markets, Class A assets in primary markets are experiencing strong values and demand for properties.  Current prices reflect a significant difference between trophy properties in major markets and assets in non primary markets. There is a flight to core assets and to quality.  Some good news is that all property types have moved out of recession into recovery in this real estate cycle.

 Bob –  Can you give us a quick snapshot of each property group and how they are faring?

Walt – Sure I’ll give a very brief summary:

Industrial – still fighting through oversupply, but quality properties are selling to investors.

Office – Struggling due to a lagging growth rate, however strong demand for Trophy properties.

Healthcare – Currently performing well in this market.  Medical office buildings are outperforming office properties.

Multifamily is strong and getting stronger.  Continued strong increases in rents are forecast.

Retail – Has strengthening occupancies and rates, there aren’t a lot of properties selling but again a strong flight to quality for example, Simon’s Properties purchase of ABQ Uptown.

Hospitality – is having rapid and strong growth in fundamentals.

Gaming Properties – There has been a freefall for most gaming properties since 2009, massive distress and defaults.  Tribal sovereignty has been confirmed by the courts and it might be difficult for lenders to foreclose on tribal properties.

So that a very short synopsis.

Bob -You mentioned the real estate cycle.  So what can someone do once they understand where they are in the cycle and maybe a more important objective is how can you create an exit strategy?

Walt – One thing I forgot to mention Stephen Duffy talked about was, there is opportunity in local non primary markets for local investors to analyze the market and make some good investments.  Which ties into your question, yes exit strategies are so important.  What is the plan? How long until the next peak? Is this a time to get in or get out?

Obviously, each situation is different, at Sperry Van Ness, we can help analyze the market, look for trends and develop a plan to get in and also a plan to exit the market, through in depth planning, analyzing the market and developing a strategy on when to acquire and sell assets.

 Bob – Anything else today and how can people reach you?

Walt – Thanks Bob, I want to mention the auction this Thursday August 4^th, 3801 Eubank, opening bid 396,000, a 7,000 square foot office building in Eubank. That’s $56/sf.  My number is 256-1255, website http://www.waltarnold.com thanks Bob and I’ll talk to you next Monday.