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Consider this: a CRE bottom is starting to form from the MIT Center for Real Estate [From mit.edu]:
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MIT Center for Real Estate’s gauge rises 4.4 percent in third quarter as more signs of a market bottom appearTransaction prices of commercial property sold by major institutional investors rose by more than 4 percent in the third quarter of 2009, according to an index developed and published by the MIT Center for Real Estate (MIT/CRE).
Find the rest of the article here http://web.mit.edu/press/2009/mitcre-commercial.html… yes these figures probably don't include portfolios with too much distressed property in them but hey I’ll take any bottom at this point.
Typically prices fall much faster for commercial real estate than for residential real estate (prices for residential RE tend to be sticky and decline for several years, however CRE owners have far less emotional attachment to their properties).
It is very possible that CRE prices are near the bottom for non-distressed properties. It depends on if buyers are adequately discounting future increases in the vacancy rate and lower rents. It is a different story for distressed properties.
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The gloom and doom machine is busily casting clouds and a pall over the CRE marketplace and its pistons are the mainstream media…..and they are pumping away with their “insightful” observations calling for the demise of the CRE world. Like monkeys banging away on a typewriter they are hoping some of this random and obvious prose becomes real journalism in some way. Where is the other side of the argument? Are there opportunities in Commercial Real Estate today? Next month? How about next year? Inquiring minds want to know so we did some digging on their behalf.
Every week I speak and do business with a great network of diverse and talented people in all aspects of this business and this is the movement I see happening:
1) Non-distressed bottom starting to form. I submit the article above as a possible indicator.
2) Distressed assets are still in crisis but I see movement and thawing in this market:
b. Vulture REITs turning to buying distressed debts to wait out the current Bid-Ask gap in pricing CRE property. My conversations with my friends at Apollo confirm this to be a major strategy that is starting to prove to be a profitable model. They are gaining equity returns with debt security. Check
c. Technologies such as RIISnet.com’s ADAPT platform are giving the market a much needed confidential online exchange to value and dispose of distressed properties or find buyers for distressed notes. If you’re involved with disposition of distressed assets in a fiduciary capacity you absolutely need to go HERE and scroll down to the RIISnet section of the page….it will be well worth your time.
d.A major distressed market opportunity right now is Hospitality:
Number of Distressed Hotel Assets
4Q08, 124
1Q09, 98
2Q09, 838
Total hotel distressed assets as of June 2009, 1,060 worth $15.7 billion
Total hotel transactions as of May 2009, 59 worth $999.6 million
Source: Real Capital Analytics
This market is overdue for overhaul and the action is starting now to do it.
3) The one universal pain point is financing. We are starting to see some loosening of credit and financing …and even though its going slow we are definitely seeing more of a willingness to lend and some more liquidity starting to enter the CRE market. Stay tuned on this front. Scott and I are gathering funding sources that are making loans in the CRE market every week and hope to be able to make introductions and assist in making deals happen. If you have any questions regarding this just email us at Warren.Samek@fnf.com or Scott.R.Miller@fnf.com.
4) The Medical Buildings and Government market are still going fairly strong. Here are some other growth areas to consider as well:
Top 5 Office Rent Growth Markets
as of October 30, 2009, YOY
Market, $psf, % change
Charlotte, N.C., 23.27, 14.2Stamford, Conn., 41.87, 9.0Riverside, Calif., 27.57, 7.0Cleveland, 22.78, 6.2Dallas, 33.13, 2.6
Source: CB Richard Ellis
5 Fastest-Growing Cities
City, Population change 2007–08 (%)
New Orleans, 8.2
Round Rock, Texas, 8.2
Cary, N.C., 6.9
Gilbert, Ariz., 5.0
McKinney, Texas, 4.8
Source: U.S. Census Bureau
REITs Surge in 2Q
Sector, 2Q09 total return (%), YTD total return (%)
Industrial/office, 29.94, -14.59
Retail, 38.84, -11.94
Multifamily, 22.93, -13.16
Hospitality, 74.57, 7.87
Total 28.85, -12.21
Source: National Association of Real Estate Investment Trusts
Its time to evaluate how you’re positioned to reinvent your CRE business and capitalize on what IS happening out there now. Or at the very least preparing for what is going to unfold next year. Reading the mainstream media’s Cassandra-ish take on the “death by a thousand cuts” for our industry is only fun for a few minutes. Spend the rest of your reading time looking for the movement and the trends and skating to where the puck is going to be a la Gretzky (for you hockey fans). See you in a couple of days with a feature on the state of financing and Commercial Real Estate: trends, where to find it, alternative sources, and government backstopping are all going to be covered.
4Q08, 124
1Q09, 98
2Q09, 838
Total hotel distressed assets as of June 2009, 1,060 worth $15.7 billion
Total hotel transactions as of May 2009, 59 worth $999.6 million
Source: Real Capital Analytics
This market is overdue for overhaul and the action is starting now to do it.
3) The one universal pain point is financing. We are starting to see some loosening of credit and financing …and even though its going slow we are definitely seeing more of a willingness to lend and some more liquidity starting to enter the CRE market. Stay tuned on this front. Scott and I are gathering funding sources that are making loans in the CRE market every week and hope to be able to make introductions and assist in making deals happen. If you have any questions regarding this just email us at Warren.Samek@fnf.com or Scott.R.Miller@fnf.com.
4) The Medical Buildings and Government market are still going fairly strong. Here are some other growth areas to consider as well:
Top 5 Office Rent Growth Markets
as of October 30, 2009, YOY
Market, $psf, % change
Charlotte, N.C., 23.27, 14.2Stamford, Conn., 41.87, 9.0Riverside, Calif., 27.57, 7.0Cleveland, 22.78, 6.2Dallas, 33.13, 2.6
Source: CB Richard Ellis
5 Fastest-Growing Cities
City, Population change 2007–08 (%)
New Orleans, 8.2
Round Rock, Texas, 8.2
Cary, N.C., 6.9
Gilbert, Ariz., 5.0
McKinney, Texas, 4.8
Source: U.S. Census Bureau
REITs Surge in 2Q
Sector, 2Q09 total return (%), YTD total return (%)
Industrial/office, 29.94, -14.59
Retail, 38.84, -11.94
Multifamily, 22.93, -13.16
Hospitality, 74.57, 7.87
Total 28.85, -12.21
Source: National Association of Real Estate Investment Trusts
Its time to evaluate how you’re positioned to reinvent your CRE business and capitalize on what IS happening out there now. Or at the very least preparing for what is going to unfold next year. Reading the mainstream media’s Cassandra-ish take on the “death by a thousand cuts” for our industry is only fun for a few minutes. Spend the rest of your reading time looking for the movement and the trends and skating to where the puck is going to be a la Gretzky (for you hockey fans). See you in a couple of days with a feature on the state of financing and Commercial Real Estate: trends, where to find it, alternative sources, and government backstopping are all going to be covered.
Check out our new Commercial Real Estate Search Engine:news, videos, research, government records, customized search functions, and a job listing metasearch page. We're getting a large amount of hits on this thing so there must be some good stuff on there. Go HERE to check it out or put this address in your browser: http://www.fidelity.bigskymine.com.
See you in a few days with our next post.
Best Regards - Warren (warren.samek@fnf.com)
See you in a few days with our next post.
Best Regards - Warren (warren.samek@fnf.com)
