One segment of commercial real estate that has seen the greatest increase in value has been the multi-family market. “Investor interest in U.S. multifamily properties continued at a healthy clip at the beginning of 2011, as investment sales dollar volume jumped 40% in the first quarter over the same period last year. More deals closed than in any quarter since mid-2005 accounting for $9.4 billion in total sales volume”. – CoStar Group
Apartments have become the preferred investment, and have even attracted seasoned investors away from their traditional investment niche such as, office, retail, and industrial real estate sectors. Large institutional players, including private equity funds, have been amassing cash during the last few years in hopes to capitalize on the surging multifamily market. In 2011 REITs (Real Estate Investment Trust’s) and private equity firms were the dominant buyers of multifamily properties. REITs purchased a total of $515 million in the quarter, while private equity player netted $117 million in sales, an amount expected rise into 2012.
Due to the heavy and continued interest in the multifamily market, and demand over shadowing the current supply of product coupled with the ever slowing in sales volume of the remaining three major commercial property types, (Retail, Office, Industrial) locating commercial property for sale has never been as difficult a task as it is today.
Several seasoned commercial real estate professionals have found opportunities through utilizing their network of agents, brokers, and principles to locate off-market commercial properties for sale. Off-market commercial properties transactions have become a strong segment of all sales transactions over the course of the last 18 months and there are no signs of slowing down.
In lieu of having a strong network of seasoned professionals to fall back on, other commercial real estate professionals have been relying more than ever on the many commercial multiple listing service providers-CMLS. Commercial Multiple Listing Services provide an avenue for industry professionals to locate income properties in a market in which the current demand outweighs the supply. Many commercial real estate professionals are finding some success locating commercial properties for sale on such sites as;
Locating commercial properties for sale is only one side of a transaction. Listing, Marketing, and the Selling of commercial properties has seen a new challenge in recent years. Commercial real estate professionals such as; brokers, agent, principles, and the lenders that underwrite these transactions whom in the past relied on market trends, and sales comparable to properly price income properties have found that given the current market conditions, and the lack of product have added a new ripple in properly valuing commercial properties for sale. In addition, commercial property investors have found themselves internally conflicted about having to pay premiums for certain income properties most of all multifamily properties caused by the amount of competition for these assets by REIT’s and Private Equity Funds.
In the past real estate professionals have relied on sales comparable to guide them in the evaluation of income properties for sale, but in today’s market the lack of transactions, coupled with the inflated multifamily market has made it ever more difficult to do so. Traditionally certain indicators were used when evaluating income or underwriting properties for sale such as;
• Cap Rate
• Cost Per SqFt.
• Market Reruns
But today there is very little data to go on to support the current market trends, creating another speculative market as seen in 2004-2007 prior to the collapse of the housing market. Many economist, and industry professionals feel that the current lack of viable commercial properties currently for sale on the market which has in turn inflated prices to a certain extent, especially in the multifamily sector, coupled with the ability of investors to acquire financing dollars at all time record lows could potentially end in a secondary collapse once the debt matures and comes due if not monitored closely, but Despite an uneven economic recovery, fundamentally, the outlook remains optimistic, and fundamentally the economy continues to improve. Good luck and find that commercial property for sale.