A Lesson in Commercial Real Estate Values

Just-released Spring edition of NAR’s Commercial Magazine Commercial Connections. See page 12 of NAR’s Commercial Magazine for my article on commercial real estate values and cap rates. 

Bad news is that commercial real estate values have plummeted.  Great news is that transaction volume will increase dramatically this year given these attractive prices. 

Please comment to let me know what you think.

Comments

  1. Chris Wagvik

    Thanks for all you do Ted. I rather enjoyed your article. It was much more straight forward than most articles I read that just say, “commercial is bad and it’s gonna be bad for a few more years.” This really helped understand the how far things have come.

    I unfortunately do not agree with your assessment that transaction volumes will increase dramatically. We still have far too many underlying negatives in our economy thru both unfinished corrections as well as legislative hinderances. Even at such bargains (comparatively speaking) this inventory will take an excessive length of time to change hands.

    Admittedly my commercial real estate economics knowledge is fairly limited (If you have any good texts to suggest, I’d love to hear them). I hope you’re the one that is right!

    1. tjones

      Unfortunately the cause of the increase in sales volume is both negative and positive. The negative side is that most of the sales volume in the coming 18 months is being driven by distressed real estate. The good news side of this is that we are now seeing the BEST buying opportunity of commercial real estate since 1988 and 1989. And fortunes were made by buyers then. As they will be made by buyers now.

      As Real Capital Analytics reported, there was $558 billion of commercial real estate sales in 2007. $182 billion in 2008. Less than $55 billion in 2009. The forecast for increased sales is a no brainer.

      Would be willing to bet a beer on this,….or two And fortunes will be made by buyers of real estate in the coming 12 to 18 months. Trust me.

      Ted

  2. Rex Benton

    Dr. Jones:
    I’d like your approval to include your adjusted value cap rate chart in an article I am writing on property values. I write a monthly column on CRE for business journal in Savannah, GA as well a blog referenced above.

    Would that be ok with you? Thanks!

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