When the residential real estate market hit the doldrums, commercial real estate was there to take up the slack. However, all of the building that occurred in 2007 and 2008 did not have the desired effect. The market peaked in late 2007 and dropped 15% in 2008 bring values back to 2005 levels.
Add to the losses in residential real estate and the stock market, it is a tough time for the investors.
Commercial real estate prices in the U.S. dropped by almost 15 percent in 2008, more than home prices, with fourth-quarter depreciation the greatest in the national apartment market, Moody’s Investors Service said in a report.
The price decline eliminated the gains seen in 2006 and 2007 and returned values to 2005 levels, according to the Moody’s/REAL Commercial Property Price Indices. Prices fell 2.2 percent in December from November, said New York-based Moody’s.
Commercial values are now down more than 16 percent from their peak in October 2007, said Moody’s. The deepening recession is causing tenants to cut jobs and vacate space, bringing down building incomes, while the credit freeze is making it difficult to finance property purchases. via Bloomberg.com: U.S..
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In smaller more stable markets Commercial and Investment buys are still to be had. When the infrastructures were developed to accommodate over built residential they were doomed to fail. A good CAP rate is a good CAP rate regardless of where it's located.
Ugh. Lance is right though. Here in Washington DC we're seeing some great investment opportunities in commercial real estate.
Brandon, I like the DC market pleantly of opportunity to look inward rather than the sprawl for lack of a better term. And I think you will see more and more City governments realizing the same and finally cooperate with those who want to rebuild rather than build.
Same situation here in Atlanta. Our market is extremely saturated with brand new vacant strip malls that stretch deep into the suburbs. Owners cannot lease or sell right now. With price reductions not helping it looks like we are in for a long fight.
Due to economy crises all companies are cutting down their costs so its natural it will effect the commercial real estate.Everyone is hesitating to invest in more infrastructure unless they seems huge business opportunity in near future.