Investment Real Estate on the Road to Recovery

While the overall economic climate continues to pause challenges for a full recovery, the investment real estate market has been experiencing notable resurgence in trading activity, especially with the multi-family sector. 

Compared with last year, the first six months of 2012 has already witnessed a significant increase in sales of apartments, and all classes of leased investment properties. In terms of demand and valuation, multifamily leads all property types, with  notable trading velocity covering hospitality and retail properties. Stabilized, larger apartment buildings are now commanding capitalization rates typical of pre August 2008 levels. Similarly, we see well occupied anchored shopping centers approaching cap rates not seen since 2008.

The market will continue with this uptick driven by unprecedented low interest rates, and demand for new apartment units. In-fill located land, suitable for both multifamily and commercial use is now commanding values not seen in several years, helped by increased availability of construction financing.

Although we are in an election year with unpredictable set of expectations, the commercial real estate is in a rebound, expecting to continue with this same pace for the balance of the year. This premise is supported by the enormous depth of liquidity found in the current market, and continuing demand to deploy more capital in the acquisition of income producing properties.

by Raffi Krikorian

Raffi D. Krikorian is the founder, president and CEO of Investment Real Estate Associates, headquartered in Encino. For more information, please contact (818) 386-6888 or visit www.irea.com.

(Originally published in San Fernando Valley Business Journal, July 23, 2012.)