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Nearly 40 million Americans invest in REITs

Investors See CRE Picture Brightening, Survey Says

03/17/2010 | By Matthew Bechard

Investors See CRE Picture Brightening, Survey Says
The mood among commercial real estate investors is generally improving, according to a report from PricewaterhouseCoopers (PwC).
 
PwC's quarterly Korpacz Real Estate Investor Survey, released March 16, reveals that investors are more bullish on a recovery in the commercial real estate market than they have been at any point in the last two years. For example, PwC noted that overall cap rates have "stabilized." From the market peak in 2007 to the end of 2009, the aggregate average overall cap rate reported by survey participants had ballooned from 6.87 percent to 8.49 percent. In the first quarter of 2010, that figure actually ticked down to 8.42 percent, and respondents said they expect cap rates to "hold steady" in a majority of markets.
 
Stiff competition for premium assets is having an impact in this regard, according to the report: "Helping to stabilize overall cap rates, and even compress them a bit, is plentiful capital targeting a very small pool of quality offerings."
 
PwC's analysts also speculated that undercurrents in the commercial mortgage-backed securities market could influence the direction of the market significantly in coming years. For example, FDIC data show that the rate of commercial mortgage defaults rose from 1.8 percent in 2008 to 3.8 percent in 2009.
 
While the expected swell of distressed assets coming to market hasn't been as quick as many had hoped, investors remain confident that dwindling income streams and a difficult borrowing market will bring attractive buying opportunities to the market before long, according to the report.