Office Supply/Demand Dynamic Improving Dramatically

Speaking prior to the Georgetown University McDonough School of Business and NAREIT Spring 2011 Real Estate Luminary Series, Thomas Carr, managing partner with Federal Capital Partners, said his firm is focused on finding value in the market. Carr said his firm is able to do that in part because it is not confined to any particular sector or any specific place in the capital stack.

"Where we are seeing the biggest opportunities today is in the B and C-class multifamily market," Carr said. "This market is a little bit less competitive and there are tremendous learning curve benefits to being in that business for a long period of time. Also, there are currently lots of opportunities in that space to create value."

Carr, who prior to joining Federal Capital Partners was the head of then-publicly traded office REIT CarrAmerica, said the supply-demand dynamics in the office space are improving dramatically.

"We are seeing that in increased demand and the cessation of new construction," he said. "That is affecting downtowns as well as the suburbs. However, the suburbs have been hit much harder than the downtowns in general across the country. Given that this recovery is fairly slow, it is going to take time to work through the current oversupply that is in a lot of these markets."

The recession reinforced the adage that capital is king, especially as the market underwent a liquidity crisis. Carr said the real estate capital markets have undergone dramatic improvement in a short period of time.

"We are seeing a broad trend toward more availability," he said. "Of course, the public markets led the way. What we do still see is a lot of selectivity that the capital has today. They are looking for liquidity, they are looking for safety and they are looking for yield."

Carr said once you get beyond the top-tier assets or something viewed to be riskier, the ability to complete a transaction diminishes significantly.

"The institutional market is very strong with a lot of competition among buyers, and the non-institutional market is still very spotty. That does create a lot of opportunities for people willing to take that risk," Carr said.

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Office Supply/Demand Dynamic Improving Dramatically

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