The prevailing talk on Wall Street and in the media of late, has been about the troubles with subprime mortgages, the credit crunch and doomsday scenarios that could impact commercial real estate.
What most people fail to realize is that the current situation impacting residential real estate is not the same for commercial real estate. For example, there has not been the same level of overbuilding in commercial as there was in residential. Secondly, most investment in commercial real estate entails some degree of equity, with 100% nancing a rarity. The portfolios of commercial real estate investors tend to be more diverse than those of residential investors, so the sources of capital are much more varied. Panic and over-reaction could limit or curtail the availability of capital needed by private investors, but overall the situation does not appear to have had a devastating impact on commercial real estate.
A record $257 billion in commercial real estate transaction volume has occurred so far into 2007. In all of 2006, $306.8 billion worth of commercial real estate traded hands, compared with $267.6 billion in 2005. Both surpassed the $150 billion that traded hands in 2004. So far, commercial real estate is still ful lling the appetite of investors.
The NAR forecast for ve major commercial sectors includes analysis of quarterly data for various tracked metro areas. The sectors include the o ce, industrial, retail and multifamily markets. Metro data were provided by Torto Wheaton Research and Real Capital Analytics. The O ce Sector: The sector of choice for most investors, especially with improving fundamentals....
The o ce sector, for the most part, has not experienced a signi cant amount of overbuilding. The cost of steel and other factors have helped to keep the level of speculative new construction to a minimum in most
The Industrial Market: Rebirth of the technology sector fuels demand for ex space.... While the main driver for the national industrial market continues to be the need for warehouse and distribution space, there has been a marked increase in the demand for ex space, especially in technology markets like San Jose, Portland and Phoenix. Like the o ce sector, new supply has been build on a build-to- suit or pre-lease basis. Building obsolesce continues to be a factor for distribution facilities.