Why Commercial Real Estate Remains Attractive
By: Myles, February 20th, 2008
As reported in NewsMax, while economic uncertainty and the credit crunch have led to investor anxiety in many markets, commercial real estate remains relatively attractive, according to Deloitte LLP’s recently released report, 2008 Real Estate Capital Markets Industry Outlook.
According to Dennis Yeskey of Deloitte’s Real Estate Capital Markets practice. “In prior boom cycles, commercial real estate has responded by overbuilding. The industry has clearly learned its lesson because this time commercial real estate is enduring a credit crunch, not a crisis, partially because it resisted this urge. No doubt the industry is in a strong position to withstand a recession, should one occur, and commercial real estate remains a viable investment option for those seeking to diversify and insulate their portfolios from market volatility.”
Deloitte’s Yeskey concludes positively that “. . . when compared to other investment categories (stocks, bonds, etc.), commercial real estate remains an attractive investment vehicle due to its stability and opportunity for diversification.” The report makes a number of positive observations regarding commercial real estate, why there is optimism on the horizon:
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Over the 3-year period from 2004 to 2006, core private commercial real estate had annual returns of more than 17 percent, while the S&P had an average annual return of 10.44 percent over that period, NASDAQ returned less than 7 percent, and bonds returned less than 5 percent.
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Due to the weak U.S. dollar, commercial real estate in the
U.S. is relatively attractive to foreign investors compared to other international markets. -
Overall vacancies in commercial real estate remains stable and rent continues to increase.
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