CRE investment climate improves in autumn

Commercial investment improved as the year wound down.

Many property management companies who looked for investment avenues during the third quarter experienced a slight improvement in conditions.

The apartment sector experienced the most improved level of investment conditions, as it rose to 7.6 on a 10-point scale, according to a report completed jointly by the CCIM Institute and the Real Estate Research Corp. Industrial properties experienced a gain, as it was at 5.6. Hotel properties rose to a level of 5.9, while retail jumped to 5.4 and office properties improved to 4.8.

Much of the lack of investment growth was due to the slow economic progress in the past several months, the report explained. This hurt investors, as they have been unable to find a large volume of reasonable investment options.

However, the report noted that investors prefer commercial real estate as an investment vehicle, as it is more of a steady option than other strategies.

"Returns on investment income from commercial real estate can still be achieved over time for those with patience," said Kenneth Riggs Jr., chief real estate economist for the CCIM Institute. "There are plenty of investors seeking to avoid the volatility of the stock market, and who require higher yields than those offered by bonds and cash investments. Commercial real estate is a good alternative for such investors, particularly those who are looking for income in a slow economy."

Property values remain stable, transactions fall in Q3
Investors experienced a relatively stable commercial market during the third quarter, as prices did not change significantly, the report explained. Additionally, transaction volume fell markedly during the quarter, as well.

The apartment sector experienced a volume drop of 5 percent during the third quarter when compared to the previous three months, the report said. Office property sales fell 15 percent, while retail sales dropped 10 percent. Hotels experienced the most significant decline, as it fell 25 percent.

Commercial recovery may continue slowly
The commercial real estate market may continue to improve at a slow pace, according to a report from Moody's Investors Service. This should be most prevalent in commercial mortgage-backed securities, as office and retail properties will not see recovery pick up until at least 2014. However, Multifamily and hotel properties are already improving in recovery.

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