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Tough Environment for Commercial Real Estate Deal-Seekers

11/07/2011 | By Allen Kenney

Tight conditions in the commercial real estate market are frustrating deal-seeking investors, according to Collette English Dixon, vice president of transactions for Prudential Real Estate Investors.

Speaking with REIT.com during The Real Estate Roundtable's fall meeting in Washington, D.C., Dixon said investors, particularly those focused on core properties, are showing concern over the levels of returns being demanded for top-tier properties. Dixon also said underwriting rent growth is of concern to investors as well.

"With the slowdown in the economy, everyone's concerned about what that means for job growth and demand, especially in the office sector and then additionally in the multifamily housing sector," she said.

Dixon noted that opportunities may exist in secondary markets. However, major investors have yet to go that route en masse, she said.

"I know all of the institutional investors are resisting that pretty aggressively right now," Dixon said.

Dixon also discussed some of the current bright spots in the REIT industry. Despite some objections to current price levels, she noted that the multifamily sector remains a compelling play for investors.

"There's still an expectation that demand is going to exceed supply, so that is truly something that most institutional investors are pursuing pretty aggressively, the development opportunities in markets that seem to be very undersupplied and demand-rich," Dixon said.

The grocery-anchored retail sector core office market are also attractive, according to Dixon.