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Core commercial real estate luring in investors

Investors have become more cautious since the real estate market debacle in 2008.  A great many high-risk property fund managers that relied heavily on debt financing ended up in collapse during this period.

One response has been for investors to take a greater interest in core real estate.  Though the increased demand for "core" buildings has resulted in lesser returns, many investors are looking at core real estate due to inflationary concerns.  JP Morgan Chase & Co. has in place a $21 billion core fund.  Blackstone Group LP has also been moving into the core business.

While many of these core properties have been purchased, there are still a substantial number of opportunities for investors. Three-year net returns through 2013 are notably higher than returns have been in a number of decades. The return on core real estate has been better than commercial bonds over this same period.

There are relatively lower debt levels with core buildings than with many of the so-called high risk assets. Also, the majority of real estate investment overall now includes core assets.

We need to keep in mind just how large the real estate investment market is. Worldwide it is close to $29 trillion with the U.S. accounting for $7.3 trillion of this.

When speaking of real estate matters, experienced attorneys are needed when it comes to commercial closings and disputes. These attorneys can also provide advice when it comes to tax and title issues, financing, zoning, construction, etc. Considering that millions of dollars are invested every year in Florida alone, having a second set of eyes to make certain that transactions are properly conducted is an invaluable service.

Source: Bloomberg Businessweek, "Office Towers Better Than Bonds Luring Global Investors," Hui-yong Yu, March 11, 2014

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