Commercial Real Estate Investment May Have Topped Out

With all the news about residential markets on the downturn, commercial real estate investments are now showing signs of some slow down especially in secondary markets. Primary markets are still very competitive with low cap rates although may be on the market for a longer period.   

"Investment in commercial real estate appears to be slowing because of rising interest rates and high prices, and investment returns may have reached their peak, reported Prudential Real Estate Investors (PREI) in its mid-year outlook. 
Plenty of capital continues to chase real estate, said PREI. However, “the balance of power seems to be shifting slightly in favor of buyers,” stated Youguo Liang, managing director and head of PREIT Research. 

Higher interest rates so far appear to be affecting transactions involving secondary markets and inferior-quality properties, according to PREI. PREI said it expects that commercial real estate investment returns have peaked and will begin to moderate through the rest of 2006 and into next year. " ( Multi-Housing News, 7/26/06)