CCIM report: REITs stage comeback in late 1999

The trusts held 23.4 percent of total dollars invested, up from 15 percent in early 1999

Real Estate Investment Trusts, or REITs, jumped back into the national commercial real estate spotlight in late 1999 by capturing 23.4 percent of the total dollars invested, the trust's best showing since mid-1998, according to transaction data compiled by the Commercial Investment Real Estate Institute and Landauer Realty.

The data, published in the organizations' CCIM/Landauer Investment Trends Quarterly, also revealed that investors took title to a range of property types, a reflection of market confidence and future performance in commercial real estate.

The REIT comeback in third quarter 1999 follows two quarterly reporting periods when the trusts posted market share transaction activity below 15 percent.

All property types benefited from REIT activity, including the retail sector, which captured the quarter's largest single transaction, the $810 million Ala Moana center in Hawaii. REITs also accelerated dispositions, appearing as the seller in 9.2 percent of the transactions reported.

"As inflows of public market equity capital have slowed, REITs are taking capital gains on qualified assets and redeploying funds on acquisitions that either produce superior yields or contribute to improved portfolio structure," said Institute President W. Duncan Patterson, CCIM, in a news release.

Office properties, the traditional leader in investment activity, again led all property types with 36.4 percent of the capital total.

However, quarterly records were set for the industrial, multifamily and land sectors.

"The distribution of activity pointed to a broadening of scope in commercial real estate investment allocation," said Hugh F. Kelly, Landauer chief economist. "It is telling that the most heavily weighted property types office and retail fell inside their historical record sales."

Other key findings of the Investment Trends Quarterly were:

The average capitalization rate dropped 30 basis points during the quarter to 9.5 percent, the lowest average cap rate since the report was initiated in 1995.

Investors continued to acquire high-end properties. Of transactions analyzed, 24.5 percent were priced at $20 million or more.

Central business districts of Boston, Chicago, Los Angeles, New York, San Francisco and Washington, D.C., accounted for 21.5 percent of the quarter's investment dollars, a testimony to investor confidence in these areas.

The CCIM/Landauer Investment Trends Quarterly survey is compiled from a broad-based-sampling of $9.1 billion in commercial real estate transactions throughout the United States. The majority of these transactions have been reported by certified commercial investment members.