December 18, 2009

No new news - 2010 CRE Investment Outlook

In NREI's 2010 investment outlook, there is good news and bad news - but really no new news.

The conclusion is basically what we continue to hear - there is capital, there is an interest in buying, but no activity because i) there's no leverage, ii) there's a pricing gap that keeps buyers away, and iii) there's a wait-and-see attitude for the onslaught of distressed properties.

As the report does point out, better properties are still getting solid cap rates. Our view, though, is that while cap rates will remain an important metric, it's utility has and will continue to fall. Unlike two years ago, investors are now taking the time to calculate realistic returns on realisitic NOI's. That is going to make cap rate comparison more difficult as a base-line metric within asset classes. This is especially true when distressed properties are added - cap rates simply cannot reflect an investor's outlook and expected return.



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