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Commercial Department: From the Top: December 2006


From the Top

Despite the dark clouds that have rolled in over many real estate markets, investments in commercial real estate could continue to be a bright spot as we enter 2007.

In particular, real estate funds are expected to end 2006 on the high note upon which they entered the calendar. According to fund-research firm Lipper Inc., they have increased 22.2 percent in 2006 — in part because of strong performance in real estate investment trusts (REITs).

Although somewhat affected by the ups and downs of the residential real estate sector, REITs’ success is tied to numerous factors. One is an increase in foreign investment: In the past 12 years, the number of countries with REITs has grown from three to 17, at last count. Another part is REITs’ sheer composition — primarily, the trusts deal in multifamily, office and industrial amenities, many of which have seen positive turns in recent years.

As Lighthouse Commercial Mortgage’s Vernon Morrison details in this month’s Lead Article, the apartment market in particular is primed to pick up investment speed. Buoyed by the rash of condominium conversions and other factors, vacancy rates are declining in numerous metropolitan areas — nationwide, they fell to 5.4 percent in the third quarter from 6.7 percent in third-quarter 2004.

Earlier this year, research firm Marcus & Millichap backed that up with a bright outlook for private and institutional investors in the apartment market, with expected stable, low-risk returns. 

Of course, with the uncertain housing market adding an element of caution to the new year, clients with little commercial-investment expertise are advised to enter the field with care. Tami Athens of Commercial Loans R Us addresses 10 tips for working with new investors.


Geary Britton-Simmons For questions on this article, call (800) 297-6061 or e-mail

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