Reports indicate improvements in commercial real estate

Real Capital Analytics recently released a report indicating that commercial property sales increased 57 percent in 2011, as activity spiked in the retail property and garden apartment sectors, reports Bloomberg.

Real Capital Analytics recently released a report indicating that commercial property sales increased 57 percent in 2011, as activity spiked in the retail property and garden apartment sectors, reports Bloomberg.

According to the report, the surge in activity resulted in $220 billion in sales throughout the year as 14,700 commercial properties - each estimated to be worth at least $2.5 million - were involved in transactions.

Meanwhile, the report noted that retail property sales surged by 91 percent from a year earlier accounting for $42.4 billion of business, while low-rise apartment sales increased by 70 percent to $34.5 billion. It was noted in the report that transactions in Manhattan were responsible for 123 percent of all commercial real estate deals in the country.

It's believed that the rise in activity is a result of more investors seeking high yields from real estate that provides income, while a large number of current owners uploaded property to deal with debt acquired from properties purchased at the market's peak.

"Buyers have started to broaden their horizons both geographically and by property type," Real Capital Analytics said.

However, not all sectors of the commercial real estate market recorded gains. According to the report sales declines occurred in suburban office complexes and shopping center anchored around supermarkets. 

Meanwhile, an additional report from the American Institute of Architects anticipates the commercial sector to lead real estate recovery for years to come - expecting a 6.4 percent rise in construction spending by 2013.

Additionally, the report indicated that difficulties obtaining financing for construction projects and marketplace anxiety will continue to be major obstacles for the commercial real estate sector. 

"Spending on hotels, industrial plants and commercial properties are going to set the pace for the construction industry over the next two years," said AIA chief economist Kermit Baker. "The institutional market won't experience the same growth, but healthcare facilities and places of worship are poised for a positive economic outlook in that sector."

The report also indicated that corporate profits have started to return to levels seen prior to the recession and have subsequently been spending more capital with borrowing rates at record lows. This demand is anticipated to result in a 2.1 percent rise in spending during 2011 on commercial real estate construction projects.



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