U.S. commercial property purchases may double this year as confidence builds among investors with access to credit.
Transactions have surged over the past year as low interest rates made it cheaper for REITs and various private-equity buyers to purchase office buildings, retail space, industrial facilities, apartment communities, and health care properties. Completed acquisitions by U.S. REITs more than tripled to $24 billion in the 12 months ended Feb. 28 versus the year before, according to data compiled by Bloomberg.
Dan Fasulo, managing director of Real Capital Analytics Inc., said he wouldn't be surprised if U.S. commercial real estate purchases double in 2011 from nearly $140 billion last year.
Demand for commercial space plummeted during the credit crisis and recession, as investors had a tough time securing financing for new purchases or refinancing short-term debt from earlier deals. U.S. commercial property transactions plunged 89 percent to $66 billion in 2009 from their 2007 peak of $579 billion, reports Real Capital.
In addition to near record-low interest rates, a resurgent debt-securitization market is also driving the recovery. Commercial mortgage-backed securities issuance in the U.S. climbed from $2.1 billion in 2009 to $10.9 billion in 2010, notes Jones Lang LaSalle (JLL). Issuance is estimated to be more than $40 billion in 2011, “providing added liquidity to owners with maturing loans to refinance,” the JLL report states.
Source: Commercial Property Deals May Double in U.S. as Blackstone Bets on Rebound, Bloomberg (March 1, 2011)