Each quarter, Dr Glenn Mueller at Dividend Capital updates his outstanding report on commercial real estate market cycles. He addresses five separate commercial property types covering more than 50 Metropolitan Statistical Areas (MSAs).
Property types include:
His defines four phases:
To access this report click here.
Good news is that rental rates for all but one of the five segments once again increased over the past year, with retail being the only segment declining. Posting another increase was multifamily, with a strong 4.2 percent increase. The greatest increase was in hotels—with RevPAR up 6.5 percent. Hotel revenues are expressed as RevPAR which is defined as the Revenue Per Available Room and is calculated by multiplying the average daily room rate times the occupancy rate.
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Bottom line is that commercial real estate (except perhaps retail) continues to post gains or hold its own — despite miniscule job growth. On the other hand, retail was the least hit in the latest recession.
It still is time to overweight in commercial real estate given investment alternatives.