Maybe I should have finished that Headline off with a question mark. There is a great post from HousingWire reporting on the SF Fed’s report suggesting the Cap Rates are indicating a turn around in the commercial real estate market. I agree the cap rates are the key factor on investing in commercial property, however I don’t believe the economy is sound enough yet. In order to achieve these rates of returns you need tenants (businesses) to occupy the space and pay the rent. You also need a stable tax environment where property taxes aren’t skyrocketing underneath you undermining your rate of return.
Investors are expecting a widespread rebound in U.S. commercial real estate markets, according to an analysis published Monday by the San Francisco Federal Reserve Bank.
With the two most widely followed measures of commercial real estate prices showing divergent trends since early 2010, economists at the San Francisco Fed turned to capitalization rates as an indicator of expected returns on commercial properties.
“Recent declines in these cap rates appear to be signaling a commercial real estate rebound, indicating improved investor expectations of price growth in the market,” said the San Francisco Fed’s economic letter.
…..Price appreciation in Kansas City, Minneapolis, Salt Lake City and Austin, Texas, is expected to be about 2% higher than national trends would indicate, said Hobijn and Krainer.
Read Full Article to get their Graphs and details of the report.
- Commercial Real Estate Market compared to Residential (case shiller) (craigkamman.wordpress.com)
- Commercial real estate outlook turns grim (craigkamman.wordpress.com)