CRE Providing Foundation in Uncertain World
Commercial real estate may provide a foundation for educated investors seeking to balance portfolio risk during these uncertain times, as stated in Expectations & Market Realities in Real Estate 2012—New Foundations in an Uncertain World, a new annual report published jointly by Real Estate Research Corporation (RERC), Deloitte, and the National Association of REALTORS® (NAR).
The three organizations have drawn on their respective capabilities to examine the economy, capital markets, and commercial real estate property markets; thoroughly analyzing existing research; and assessing the current outlook for commercial real estate. Findings indicate that the economy remains sluggish with unprecedented fits and starts, and slow growth is possible for 2012 with hopeful expectations beyond that point. Capital continues to flow robustly in search of commercial property investments, but there is concern that prudent investment discipline may be beginning to falter for top assets. The report also carefully analyzes and offers an assessment of the individual property sectors, as well as for commercial real estate as an asset class, for 2012.
“The longer the economy and investment environment remain uncertain, the more attractive and logical commercial real estate looks as an investment and the more nicely it fits into a mixed-asset portfolio,” stated Kenneth Riggs, Jr., chairman and president of RERC. “Commercial real estate does not have the major swings that we have been seeing in the stock market, it is a tangible asset in this world of surprises, it has the needed income component, and still provides for upside once this world gets its act together. These dynamics translate into more stability, a sound footing, and less risk than what one experiences with other more volatile investments. Commercial real estate also offers reasonable returns (both on a dividend and total return basis), transparency as to what is behind the investment and as to who is using a property, and a sense that at least with real estate, what one is investing in is tangible and real, and that is what the world wants for the next 10 years.”
Matthew Kimmel, valuation leader for Deloitte’s real estate services practice, says, “For long-term investors that understand the current investment conditions, commercial real estate is an investment class that may add some stability to a broader investment portfolio.”
“There is life out there, despite the uncertainty,” added Lawrence Yun, Ph.D., chief economist at NAR. “Commercial real estate was not overbuilt when we entered the recession, and absorption is positive for most sectors. We expect commercial real estate fundamentals to continue to improve with additional demand for space, assuming the economy continues to create jobs.”
“We do believe that commercial real estate is the new foundation to investment portfolios as we get back to the basics of investing in this uncertain world,” concluded Riggs.
**Expectations & Market Realities in Real Estate 2012—New Foundations in An Uncertain World **can be purchased electronically at www.rerc.com or www.realtor.org/prodser.nsf/Research.
Real Estate Research Corporation (RERC): Under Ken Riggs’ leadership, RERC provides real estate research, valuation management, strategic consulting, independent fiduciary services, and web-based management information services for the commercial real estate industry. In addition to directing the firm’s business ventures, Riggs serves as publisher of the quarterly RERC Real Estate Report and of the RERC/CCIM Investment Trends Quarterly, and co-publisher of the annual forecast report, **_Expectations & Market Realities in Real Estate,_ **now in its ninth year of publication. Visit www.rerc.com for more information.
Deloitte: As used in this document, “Deloitte” means Deloitte LLP and its subsidiaries. Please see www.deloitte.com/us/about for a detailed description of the legal structure of Deloitte LLP and its subsidiaries. Certain services may not be available to attest clients under the rules and regulations of public accounting.
National Association of REALTORS® (NAR): The National Association of Realtors, “The Voice for Real Estate,” is America’s largest trade association, representing 1 million members involved in all aspects of the residential and commercial real estate industries.
This publication contains general information only and is based on the experiences and research of the authors. The authors are not, by means of this publication, rendering business, financial, investment, or other professional advice or services. This publication is not a substitute for such professional advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified professional advisor. The authors, their employers, employers’ affiliates and related entities shall not be responsible for any loss sustained by any person who relies on this publication.