Commercial property investment, in its various forms is a better bet now than it has been for years, and especially than it was during the boom. Investors aren't missing this fact, and all the signs point to continued growth in investment volumes around the world -- it's all go for commercial property investment.
On a comparable basis, commercial property prices are lower now than they have been for decades, but, much like residential property investment, investments must be chosen on almost an individual basis. That is to say; not looking at markets, be they towns, regions, cities, but looking at it property by property, asset by asset.
The good thing about commercial property investment is that this is no problem. Whereas residential investors are constantly being warned about conducting their own due-diligence, this is a core part of commercial property investment. Whether it is done by the investor themselves or their asset management firm, or fund manager, research is always done before making a commercial property investment.
The US is a prime example. The US is proving to be one of the most popular markets for commercial property investment, along with the UK and other places with an abundance of distressed assets, coupled with potential for a strong if not swift recovery. Now, some indices say that US commercial property prices are still falling, and some say they are rising, but that is pretty much irrelevant to today's careful breed of investor, who is looking on a property by property basis.
Rising or falling there is plenty of commercial property in the US being sold at bargain basement prices, and -- with the US economy now seemingly in full recovery mode -- an increasing amount of investors and funds snapping it up.
According to the National Association of Realtors the strong recovery in US commercial property in 2010 is set to continue over the next couple of years, as firms are expected to be taking on more staff, which then increases their need for commercial space, thereby increasing occupancies and returns of properties.
In short: the recovery in 2010 was in investment volume as confidence in the recovery, and landmark sales triggered a massive increase in commercial property investment. Now this recovery will branch into recovering returns and yields.
Lawrence Yun, NAR’s chief economist, said: "Job growth creates demand for commercial space, and the economy should be adding between 1.5m and 2m jobs annually both this year and in 2012, with the unemployment rate falling to 8 per cent by the end of next year. Given the minimal new supply in recent years, the rising demand means vacancy rates will be trending down."
A similar story is being told around the world, with particularly strong recoveries being noted in Asia and Central and Eastern Europe. The biggest commercial property deal since 2008 has just gone down in the Czech Republic, with European Property Investors Special Opportunities (EPISO) and VGP paying around 300mln Euros for a logistics portfolio focused around Prague in an 80:20 JV. And Istanbul was voted Europe's best city for acquisitions and development by Pricewaterhouse Coopers. It's all go for commercial property investment.
- Friday 03 June 2011