“We are not interested in the possibilities of defeat; they do not exist.” — Queen Victoria, Former Queen of the United Kingdom
June 6, 2016 Kelsey Ramírez ,
Whereas the residential real estate market continues to recover gradually, the same cannot be said for the commercial real estate market, where prices rose much quicker, according to a study by Goldman Sachs.
Recently, regulators expressed concern for the potential imbalances in the CRE market.
Keeping rates too low for too long might encourage excessive risk-taking and unsustainable gains in commercial real estate, said Eric Rosengren, Federal Reserve Bank of Boston president.
CRE generally refers to retail, office, industrial, lodging and multi-family properties.
This chart shows the difference between commercial and residential prices:
(Source: Federal Reserve Board, Standard & Poor’s)
So what’s the difference between the two markets? According to Goldman Sachs’ study there are several factors. To begin with, the fall in construction was not as hard in the CRE market as it was in residential. Whereas it dropped by 2.8% for residential, it only dropped 1.6% in the commercial market.
Here is a chart that shows the smaller boom but smaller fall in the CRE market:
(Source: Department of Commerce)
That being said, whereas CRE prices look expensive relative to rents, according to CoStardata, commercial rent caps, the ratio of net operating income and prices, dropped to historic lows. Earnings yields on other assets such as equity and bonds declined significantly, therefore from an asset pricing perspective, CRE prices don’t look as rich.
This chart shows the CRE versus residential markets compared to bond rates, the cap rate and earnings-price ratio:
“The upshot of our analysis is that the housing recovery has been characterized by a substantial divergence between the slowly recovering residential market and the swifter recovery in commercial real estate, where prices have picked up more substantially,” Goldman Sachs Economist Daan Struyven and Vice President Marty Young wrote. “Our models point to deceleration of price gains going forward, particularly in the CRE sector.”
That being said, the company said it does not see the market declining in prices nationally any time soon.
Kelsey Ramírez is a Reporter at HousingWire. Ramírez is a recent journalism graduate of University of Texas at Arlington. Ramírez previously covered hard issues such as homelessness and domestic violence and began at HousingWire as an Editorial Assistant.
SEE IT ALL:
ARE YOU READY TO SELL OR PURCHASE – I am actively looking to build relationships with Real Estate Investors and Owner Users for multi-family, office, retail, industrial and land in Phoenix- Scottsdale-Tucson-Arizona.
Phoenix Commercial Real Estate and Investment Real Estate: investors and Owner / Users need to really know the market today before making a move in Commercial Properties or Investment Properties in Phoenix / Tucson / Arizona, as the market has a lot of moving parts today. What is going on socio-economically, what is going on demographically, what is going on with location, with competing businesses, with public policy in general — all of these things affect the quality of selling or purchasing your Commercial Properties, Commercial Investment Properties and Commercial and large tracts of Residential Land in Phoenix / Tucson / Arizona. Therefore, you need a broker, a CCIM (Certified Commercial Investment Member) who is a recognized expert in the commercial and investment real estate industry and who understands Commercial Properties and Investment Properties.
I am marketing my listings on Costar, Loop-net CCIM, Kasten Long Commercial Group. I also sold hundreds millions of dollars’ worth of Investment Properties / Owner User Properties in Retail, Office Industrial, Multi-family and Land in Arizona and therefore I am working with brokers, Investors and Developers. I am also a CCIM and through this origination ( www.ccim.com ) I have access to marketing not only in the United States, but also international. Click here to find out what is a CCIM: https://en.wikipedia.org/wiki/CCIM
Feel free to contact Walter regarding any of these stories, the current market, distressed commercial real estate opportunities and needs, your property or your Investment Needs for Comercial Properties in Phoenix, Tucson, Arizona.
Kasten Long Commercial Group tracks all advertised apartment communities, including those advertised by other brokerages. The interactive map shows the location of each community (10+ units) and each location is color coded by the size (number of total units).
Walter Unger CCIM, CCSS, CCLS
I am a successful Commercial / Investment Real Estate Broker in Arizona now for 20 years. If you have any questions about Commercial / Investment Properties in Phoenix or Commercial / Investment Properties in Arizona, I will gladly sit down with you and share my expertise and my professional opinion with you. I am also in this to make money therefore it will be a win-win situation for all of us.
Please reply by e-mail firstname.lastname@example.org or call me on my cell 520-975-5207
Walter Unger CCIM
Senior Associate Broker
Kasten Long Commercial Group
2821 E. Camelback Rd. Suite 600
Phoenix , AZ 85016
Delivering the New Standard of Excellence in Commercial Real Estate
- Commercial Real Estate Scottsdale
- Commercial Real Estate Phoenix
- Commercial Real Estate Arizona
- Commercial Investment Properties Phoenix
- Commercial Investment Properties Scottsdale
- Commercial Investment Properties Arizona
- Land Specialist Arizona
- Arizona Land Specialist
- Land Specialist Phoenix
- Phoenix Land Specialist
- Land For Sale Phoenix
- Land for sale Arizona
- Commercial Properties For Sale Phoenix
- Commercial Real Estate Sales Phoenix
- Commercial Properties Phoenix
- Commercial Properties Arizona
- Commercial Land Specialist Phoenix
- Commercial Land Phoenix
- Multifamily land Phoenix
- Retail Land Phoenix
- Industrial Land Phoenix
- Land Commercial Phoenix
- Land Retail Phoenix
- Land Industrial Phoenix
- Land Multifamily Phoenix
- Industrial Land for sale Phoenix
- Land Industrial
- Investment Real Estate
Disclaimer of Liability
The information in this blog-newsletter is for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation. Tax articles in this e-newsletter are not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding accuracy-related penalties that may be imposed on the taxpayer. The information is provided “as is,” with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose.