Commercial Real Estate News You Need To Know From Liberty SBF

May 22, 2015

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Investors are betting big on hotels and that’s driving up prices. A recent Trepp article said that demand has driven up prices for hotels by 33% over the last 12 months through the end of April, just under the pre-recession peak. Does that mean we’ll see a correction soon? According to available data, it’s not likely. With an increase of only 1% of available rooms and hotel stays up by 4.2%, demand is definitely outstripping supply.

The talk of ICSC RECon this year is the dearth of properties available for new investment and that, some say, might cause a bubble. After years in an arid investment landscape, property owners see some relief in the form of an improving economy and low rates raining capital into the marketplace. Developers and investors want to spend money to take advantage of the favorable economic conditions right now but sellers are holding back, afraid of leaving money on the table. National Real Estate Investor said that executives “expressed a desire to buy new properties while the economy is on an upswing and financing costs are low… Now there is a sort of standoff between owners holding out for higher bids and buyers unwilling to pay prices that may not make sense in the long term.” Andrea Olshan, CEO of Olshan Properties, said, “This is historic in terms of pricing in every single asset class,” she said. “We’ve never had the type of institutional investment in real estate like we’ve had recently.”

Industrial developers see some markets as becoming “frothy” in the near future. According to Jim Klein, SIOR, president of Klein Commercial developers are comfortable with the market as it is and see good years in the future but they’re afraid that the best opportunities to make money in top markets are in the past and most seem focused on infill projects, if they can find them, because those seem somewhat less risky.” Another trend he sees is spec building. “…developers are a lot happier going spec and building into the market because they are getting a better return,” Klein said.

Multifamily is multiplying as rents in April grew quicker than any other month since the Great Recession according to a new report by MPF Research. A lot of new apartments have been coming online this year and the increase in demand might be helping to absorb that, signaling good news for landlords. “Today’s performance numbers really don’t exhibit any of the slowing that had appeared likely to emerge,” Greg Willett, vice president of research and analysis for MPF Research, was quoted as saying. “We anticipate that we’ll actually boost the forecast performance soon.” Pent-up demand from young people coming into the market as the economy improves is another driver of that positive outlook.

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