US Commercial Real Estate Benefits from Healthy Capital Market

Posted by Staff Reporter (media@realtytoday.com) on May 06, 2016 10:05 AM EDT
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U.S. Strip Mall Properties Lead Overall Decline In Retail Property more big
CHICAGO - JULY 08: A sign advertises space for lease in a strip mall July 8, 2008 in Chicago, Illinois. According to recent reports, strip malls are experiencing the highest vacancy rates in 30 years as consumers are doing more of their shopping at low-cost warehouse-style stores. For the first time since 1980, more space is available to rent at strip malls than is rented out. (Photo : Scott Olson/Getty Images)

Despite the ongoing global economic turmoil and oil prices hullabaloo, things are looking good for the commercial real estate market in the United States. A recent report says the country can expect an increase in foreign investments with commercial property prices and transactions slowing down.

According to Charlotte Observer, the commercial property sector is in a good status now as there seems to a balance between the supply and demand for new space in the country. Although prices of commercial space and deals are slowing down, it is still not like what happened in the real estate market right before the crash in 2007.

Charlotte Observer noted some of the key points expressed by Mark Gibson, CEO of real estate brokerage and finance firm HFF, which sponsored a forum in Charlotte last Wednesday. According to Gibson, the real estate market is receiving increased investments from big institutional investors such as pension funds and sovereign wealth funds. Offshore investments in the U.S. commercial real estate market reached $93 billion last year, which is more than twice that of the peak in 2007 at $48 billion. The increase can be attributed to foreign companies looking at the U.S. market for stability.

After rising to nearly double digits in the past six years, Green Street's Commercial Property Price Index recently reported that commercial property value appreciations in the U.S. were at a standstill in April this year, per The Real Deal. But also the prices have stopped going up, they are still 7 percent higher than the same period last year, and 23 percent higher than the peak in August 2007 before the recession.

TRD quoted Peter Rothemund, senior analyst at Green Street, saying in their April report that, "Pricing transparency still isn't great, but it's pretty clear that property prices have stopped going up."

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