Commercial real estate investment high in 1999

Investment capital directed to commercial real estate increased 32.9 percent last year over the previous 12-month period, with all property types except retail experiencing unprecedented investment volumes, according to transaction data compiled by the Commercial Investment Real Estate Institute and Landauer Realty and released in April.

According to the CCIM/Landauer Investment Trends Quarterly, investors remained bullish on commercial real estate at year-end 1999, which posted an average deal price of $17.98 million among the six property types and a mean capitalization rate of 9.6 percent, up 10 basis points from the prior quarter.

The CCIM/Landauer report also showed that small investors continue to fuel market activity in light of some headline-making large deals. The median price per deal in fourth quarter 1999 was $3.8 million, while the mean or average price per deal was substantially higher at $18 million. When the report was initiated in 1995, the average deal price was nearly half, or $9.6 million.

"There is still an enormous segment of the commercial real estate industry appealing to small investors, either as individuals or in small partnerships," said CIREI President W. Duncan Patterson, CCIM, in a press release.

The office sector, historically the most active property type, continues to lead the market with 45.9 percent of the investment dollars, slightly ahead of the 42.3 percent share it enjoyed from 1995 through 1999. Office sales are averaging $137.50 per square foot at a mean cap rate of 9.5 percent, figures that may indicate that a plateau has occurred in office values after the long recovery.

Other highlights from CCIM/Landauer include:

Institutional investment activity was brisk among both publicly traded companies and the private market capital sources. Real estate investment trust investment accounted for 23 percent of the total investment volume in fourth quarter 1999.

Apartment buildings found favor among investors at year-end. High-end acquisitions of more than $20 million were especially sought-after, capturing more than 55 percent of the deal count for this property type.

When compared to early 1995, CCIM/Landauer confirms that liquidity has been restored to commercial real estate at decade's end. Deal submissions increased by 45 percent from 1st quarter 1995 to 4th quarter 1999, and the dollar volume during that time climbed by 23 percent.

With the exception of the Pacific states (Washington, Oregon, California, Hawaii and Alaska), every region surpassed records of investment dollars in 1999.