Industrial properties offer brightest investment outlook

Escalating land costs and higher new-construction prices are projected to put constraints on the current supply of industrial properties nationwide, paving the way for favorable investment conditions for warehouse and research and development facilities, according to the Fourth Quarter 2006 Intvestment Trends Quarterly from the Certified Commercial Investment Member Institute and the Real Estate Research Corp.

On a 10-point scale, institutional respondents gave the warehouse subsector 6.4 points for the third quarter – one of the highest ratings for any new property type this year.

The research/development subsector received a 5.7, up from 5.5 in the previous quarter.

The survey revealed that commercial real estate remains a solid investment vehicle, with institutional-quality properties estimated at $4.2 trillion in 2006, an increase of about 16 percent over the past 12 months. There was no consensus among respondents on property sectors to avoid or seek out; however, retail continued to draw concern due to overpricing, decreases in consumer spending and tenant risk.

“None of the sectors should be avoided,” the report stated, “but one must be selective about the pricing of the property.”

The Fourth Quarter RERC/CCIM Investment Trends Quarterly also revealed:

• Apartments continued to top investment property sectors. Survey respondents rated multifamily properties at 6.5, slightly higher than the previous quarter’s rating of 6.3. Expectations of rising rental demands due to the cooling off of the housing market were a key factor behind the rating, and are supported by third-quarter reported sales, as the median price per apartment unit increased from last quarter.

• Increased occupancy levels sparked by the healthy economy boosted the investment condition ratings for hotels to 6, up from 5.6. According to Smith Travel Research, hotel occupancy rates were 68.8 percent in mid-October, a 1.2 percent increase compared to the same period in 2005.

• Despite concern from some experts, all sectors of retail enjoyed increased investment conditions ratings in the third quarter. Regional malls rose to 5.3 from 4.6, power centers rose to 5.5 from 5 and neighborhood malls rose to 6.2 from 5.5. Factors behind the positive projections include rising rents and decreasing availability of space. [[In-content Ad]]