For the past few years real estate investment trusts (REITs) have dominated much of the commercial sector, snapping up “trophy properties” and taking ownership of the majority of cash-flowing commercial properties for sale in many areas of the country. Now, however, it appears that institutional investors are moving back into the market and they are ready to play ball, forcing the REITs back this quarter and moving into the number one slot as the top buyers of U.S. office properties[1].
“Institutional investors” is a term used to describe organizations that pool large sums of money in order to invest on a large scale. Examples of this type of buyer include pension funds, insurance companies and sovereign wealth funds. This past quarter, institutional investors added $1.39 billion to their office-building holdings compared to $1.1 billion on the part of REITs. According to CoStar Group, Inc, a real estate analytics firm, this means that institutional investors are moving away from being “net sellers” and toward expanding their commercial holdings once again.
Interest in commercial real estate is definitely on the rise in today’s economy, when many other fixed-income investment alternatives are holding steady with low yields. “Investors right now have a strong interest in core real estate,” explained CEO of the National Council of Real Estate Investment Fiduciaries Roy Rendino, adding that credit is more available to institutional investors right now as well.
It looks like many of the “big players” in the field are making a comeback. Are you getting back into commercial real estate or are you sticking to your current investment strategies?
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[1] http://www.bloomberg.com/news/2011-05-18/institutional-investors-edge-out-reits-as-top-buyers-of-offices.html
May 18th, 2011 at 9:43 PM
CRE is the place to be. It’s the sweet spot in an otherwise sour patch. With interest rates at these levels you need a REIT in your portfolio (read yield) and a few shares of CBG wouldn’t hurt either. When there’s blood in the streets these days we buy Commercial Real Estate, and we like it.