Commercial Real Estate Could Suffer From “Too-Abundant” Capital
March 7th, 2011
While it might be hard to see how the commercial market could move so quickly from a total standstill to having too much action and capital, that is just what many experts are predicting could happen during the “long healing process” in the commercial industry[1]. That’s right: now that things are starting to look better with transaction volumes heading up and great deals being done right and left by careful investors who have waited for just this time to move into the market, analysts believe that copycats could start moving in over the next few years and gumming up the system with “too abundant” capital.
But is that really such a bad thing? The commercial real estate market relies on investor confidence just as other real estate markets do. And renewed confidence in t he market is currently causing the commercial mortgage-backed securities (CMBS) market to double in value while lenders and investing firms are acting quickly to get involved in all related arenas. “The best bargains come in a bad market,” say analysts, pointing out that soon that bad market could start to change its face and become a good one with investors still struggling to get in.
It seems that what this really means is that if you want to get in on the ground floor of the growing commercial real estate industry once more, then the time to act is now. According to the National Real Estate Investor, the commercial real estate sector is in the “early stage of the next real estate up cycle [and]…will attract significantly more investor interest and new capital in 2011”[2]. Of course, you should always analyze your specific deals for yourself before you jump in head over heels, but does this sound like bad news to you or do you think this means that it is time to invest?
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[1] http://www.nuwireinvestor.com/articles/in-real-estate-and-investment-best-bargains-come-in-bad-56991.aspx
[2] http://nreionline.com/news/real_estate_bets_2011_0307/
March 7th, 2011 at 12:47 PM
Many properties are still over priced. Also, purchasing a building on a pro-forma basis is a recipe for disaster…AGAIN! The reality is that there is a ton of capital sitting on the sidelines waiting for deals. The market fundamentals have not changed and properties are still way over priced.