National CAP Rates

National Strip Center Snapshot (Commercial Real Estate Investment Mag.)

	4Q08	4Q09
IRR	8.49%	8.34%
Overall CAP	7.49%	7.24%
Market Rent Change	2.33%	2.86%
Marketing Time	6.39 mos.	6.25 mos.

Korpacz Real Estate Investor Survey


National Capitalization Rates
4Q08

	Overall CAP	Change for Last Quarter	Change for Next Six Months
Apartment	6.13	27	42.5
Warehouse	6.73	10	47.5
Regional mall	6.96	18	57.5
CBD office	7.14	10	52.8
Strip Shopping Center	7.49	16	45.8
Power Center	7.57	40	65.8
Suburban office	7.59	25	65.9
Flex/R&D	7.76	16	59.4
Net lease	7.85	20	NA

Korpacz Real Estate Investor Survey

Don't forget as did I, that a positive change in CAP rate is a decrease in value.

Update on CAP rates.

Alright, so about this time last year I reported on my observance of a decline in CAP rates for investment properties. You can get the article here. I was thinking that there has to be more to the story than just observing a general decline in values. In fact there is. I've noticed that some segments in the investment property markets have moved at different speeds than others. For instance, locally, I've seen single-tenant buildings with high credit tenants reduce in value at a rate less than multi-tenant strip shopping centers. Furthermore, as you can imagine, residential development land is off the charts.

Landlords, you're not left out of this content either. While a slow economy has put downward pressure on much business growth, tenants in our local market have been resistant to reduce space or move. Instead, they are opting to renew their existing spaces and maybe even negotiate a little concession. The good news is that the developer community has been somewhat observant and chosen not to build new buildings until the dust settles. Therefore, those entities who own stabilized properties, you have likely not seen too much distress.

So what can we take away here? Well, keep looking at the news only because we as professionals are expected to understand current events. However, dig a little deeper, you might just find a glimmer of hope and prosperity. Who would have thunk it?

The Real Estate Expert: Real Estate is Foolproof

"Real estate always goes up", my client says.

"Bull crap!"

Who ever said that real estate always goes up anyway? Sure you can't reasonably make more land which makes it a limited resource unlike the U.S. Dollar (ha!), but why does that make it a fool proof investment as some believe?

Real estate is a great investment. As a matter of fact, one of the best in my book. The mistake is when one believes that they can pay anything for an asset and it will be worth more tomorrow. B.O.G.U.S. I tell you. You made an ill-advised and uneducated decision.

Here's why. Over a reasonable amount of time the overall real estate market does trend toward consistent increases year after year. So... Yes, real estate (general) is a great investment.

Here's the catch though. Local markets can move inverse to the state, national, or global market. Things can happen to shift populations to and from certain local markets therefore greatly impacting the real estate market and valuations.

And... Drumrollllllllll... You CAN pay too much for a property even in a stellar local market.

So Mr. Real Estate Guy, what are you saying?

Well, consider the following tips:

(1) Do your research on any investment whether it be stocks, bonds, or real estate.

(2) Do your research on any investment whether it be stocks, bonds, or real estate.

(3) Do your research on any investment whether it be stocks, bonds, or real estate.

(4) Hire professionals to assist you. Engineers, title companies, attorneys, accountants, and of course an excellent real estate agent.

(5) Know your goals for the investment and understand how the asset will fit into and accomplish your them.

(6) Know your exit plan before you buy.

(7) Know an alternative exit plan before you buy.