Magazine article Mortgage Banking

Commercial Real Estate Investors More Cautious in 2006

Magazine article Mortgage Banking

Commercial Real Estate Investors More Cautious in 2006

Article excerpt

Expect the unrestrained flow of investment capital into U.S. commercial real estate that has pushed property values to record-high levels to slow in 2006, according to real estate experts from the University of Southern California's Lusk Center for Real Estate, Los Angeles.

Until now, investors have traditionally continued to throw money into development projects and commercial property acquisitions despite signs that property values were beginning to level off, said Stan Ross, Lusk Center chairman.

"Investors will stop signing blank checks," said Ross. "That's a healthy sign for property markets."

Although foreign and U.S. investors are continuing to acquire properties, they have begun to show more discretion, noted Stuart Gabriel, director of the Lusk Center.

"On the commercial side, property investors have been playing the appreciation game," said Gabriel. "They have bought properties, held them for a time and then sold them in the expectation of realizing substantial capital gains."

Investors will take a different approach in 2006 as they concentrate on bond-like investments, said Gabriel. Investors will also look for well-located properties that provide steady cash flows as well as capital preservation and competitive returns. …

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