Concerns Over The Future of The Stabilized Core Asset

04/15/2012

Commercial real estate investors have modified their approach when evaluating investment opportunities and have become extremely conservative, seeking lower-risk investments. Highly sought investment properties are typically well-leased and well-maintained retail properties located in well-established markets. Asset managers have been seeking these core investments that have stable nationally creditworthy tenants. These investments differ from those of past years when the market was being underwritten on the ever appreciating asset. In today’s economically sensitive market, individual commercial real estate investors, and fund managers alike have become bullish on the long-term investments properties. These stable long-term investments are designed to protect against inflation, and have a primary investment objective of creating income and capital preservation. The typically core commercial real estate investments have a long-term holding period of eight to 12 years. With fewer of these core assets coming to market and the ever growing buyer’s pool we are certain to see elevated price points not supported by the financials indicators of the asset but by the increasing desire for well leased well located core investments. This will inevitably cause a falsely inflated market and a possible secondary collapse within the retail asset class.

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