Sales of existing properties are hot: apartments, malls and self-storage units
By Kerry Hall Singe - Ksinge@charlotteobserver.com Investors are looking beyond distressed commercial real estate and may start buying up more better-performing properties, according to a survey released Monday.
Wall Street firms are also eyeing secondary markets such as Charlotte, suggesting buyers - and lenders - are more confident in the economy and the real estate industry, the report suggests."This time last year investors...
were solely focused on 'treasures' or 'traumas,'... and there was no appetite for assets in the middle of the spectrum," said Mitch Roschelle, the U.S. real estate advisory practice leader with PricewaterhouseCoopers, which sponsored the survey. "Now, many of them are looking to ... take on additional risk as they see signs that the economy and the industry are slowly healing."
Charlotte's office market is particularly well-positioned, according to the fourth quarter 2010 edition of the PcW Real Estate Investor Survey.
About 200 investors were surveyed for the national report, which has been produced quarterly for 23 years.
Respondents for the second straight quarter projected that a key measure for valuing properties, called a cap rate, will continue to fall - which is a good sign for Charlotte. Falling cap rates suggests an investment is less risky and hints at growing interest from buyers. Investors typically pay more for properties with low cap rates.
"It shows the increase in optimism for the office market in Charlotte continues," Roschelle said. "That really bodes well for the investor sentiment of Charlotte. You could find in the future you're having some bidding wars."
Analysts have said they don't expect much new development in offices, industrial buildings or retail space in the next couple of years. But while new building activity is dormant, the action is in the buying and selling of existing properties.
Since the recession, companies that bought property focused on the safest investments, typically distressed properties or prime buildings in prime locations. But growing competition has pushed up prices, leading investors to look elsewhere.
Next year, expect more investors to "move up the risk ladder," the report says, "and move beyond core assets and prime markets for opportunities."
Local commercial real estate broker Ryan Clutter said he's seen an increase in investors interested in buying property in the Carolinas.
"Overall, investor appeal of the Carolinas has been a favorable trend over last decade," said Clutter, an investment sales specialist with CB Richard Ellis. "I think it will only continue."
Additional highlights from the report: One hot industry identified in the report is self-storage units. Sales of these properties was "robust" in the second half of this year. Investors like this sector because it posted an average return of 16.52 percent over 15 years, higher than industrial, office, retail and apartment properties, the report said.
Although retail is considered weak and among the last sectors to rebound, some national mall owners are performing well. Simon Property Group, which owns Charlotte's SouthPark and Concord Mills, posted third-quarter gains in occupancy, rents and retail sales.
Apartment buildings remain a popular buy thanks to a growing number of renters and a lack of new projects in the works.
The top three markets in terms of rent growth in the third quarter 2010 were New York, which saw a 2.1 percent rise, suburban Virginia, where rents increased 1.9 percent, and Upstate South Carolina, where in Greenville rents rose 1.7 percent, according to Reis, a research firm.
Sales of apartment buildings nationally surged 63 percent in the third quarter and totaled $8.5 billion, according to Real Capital Analytics. As one survey participant said: "Everyone is betting on the future and expecting growth in this sector over the next three years."
About 200 investors were surveyed for the national report, which has been produced quarterly for 23 years.
Respondents for the second straight quarter projected that a key measure for valuing properties, called a cap rate, will continue to fall - which is a good sign for Charlotte. Falling cap rates suggests an investment is less risky and hints at growing interest from buyers. Investors typically pay more for properties with low cap rates.
"It shows the increase in optimism for the office market in Charlotte continues," Roschelle said. "That really bodes well for the investor sentiment of Charlotte. You could find in the future you're having some bidding wars."
Analysts have said they don't expect much new development in offices, industrial buildings or retail space in the next couple of years. But while new building activity is dormant, the action is in the buying and selling of existing properties.
Since the recession, companies that bought property focused on the safest investments, typically distressed properties or prime buildings in prime locations. But growing competition has pushed up prices, leading investors to look elsewhere.
Next year, expect more investors to "move up the risk ladder," the report says, "and move beyond core assets and prime markets for opportunities."
Local commercial real estate broker Ryan Clutter said he's seen an increase in investors interested in buying property in the Carolinas.
"Overall, investor appeal of the Carolinas has been a favorable trend over last decade," said Clutter, an investment sales specialist with CB Richard Ellis. "I think it will only continue."
Additional highlights from the report: One hot industry identified in the report is self-storage units. Sales of these properties was "robust" in the second half of this year. Investors like this sector because it posted an average return of 16.52 percent over 15 years, higher than industrial, office, retail and apartment properties, the report said.
Although retail is considered weak and among the last sectors to rebound, some national mall owners are performing well. Simon Property Group, which owns Charlotte's SouthPark and Concord Mills, posted third-quarter gains in occupancy, rents and retail sales.
Apartment buildings remain a popular buy thanks to a growing number of renters and a lack of new projects in the works.
The top three markets in terms of rent growth in the third quarter 2010 were New York, which saw a 2.1 percent rise, suburban Virginia, where rents increased 1.9 percent, and Upstate South Carolina, where in Greenville rents rose 1.7 percent, according to Reis, a research firm.
Sales of apartment buildings nationally surged 63 percent in the third quarter and totaled $8.5 billion, according to Real Capital Analytics. As one survey participant said: "Everyone is betting on the future and expecting growth in this sector over the next three years."
Read more: http://www.heraldonline.com/2010/12/21/2705106/charlotte-real-estate-on-rise.html#ixzz18kfj8lYbYork County, SC Charlotte real estate on rise The Herald - Rock Hill, SC
