by Rebecca Walker — November 24, 2010—With more capital available from select sources and increased demand for less volatile investments, institutional-level commercial property prices are on an upward trend, according to the CCIM Institute and the Real Estate Research Corporation (RERC).
While institutional investors continue to buy or hold commercial real estate, the recommendation to sell has been steadily increasing over the last 12 months.
“Though much uncertainty remains in the overall economy, transaction trends for commercial real estate continue to improve,” said Frank Simpson, CCIM, the 2011 president of the CCIM Institute and president of The Simpson Company in Gainesville, Georgia.
“The challenge for investors remains finding the right properties at the right price with the best return potential.”
CCM and RERC caution that the commercial real estate market is increasingly divided, with some historically high prices being paid for institutional properties in top-tier markets, while other markets are seeing little or no transaction activity other than distressed property sales.
RERC’s analysis of third quarter transactions shows significantly greater total volume on a 12-month trailing basis, with the hotel sector showing the largest increase at nearly 50 percent. The retail sector volume increased the least at 15 percent. Compared to previous quarters, there was a steady increase in volume of sales greater than $5 million for all property sectors. However, transaction activity of less than $5 million remains flat.
In terms of confidence levels of CCIM Institute members, the apartment sector continues to receive the highest investment conditions rating, a 6.0 on a scale of 1 to 10. Apartments easily outscored the industrial sector, which received a rating of 4.5. Investment conditions ratings for the retail and hotel sectors both declined to 3.9, indicating their general weakness, while offices were lowest at 3.8. The apartment and industrial sectors were the only property types whose ratings increased during the third quarter.
For more information, see the CCIM Web site.
