Market Conditions for Commercial Real Estate

Hi,
News media/analysts indicate that the downturn is yet to come for Commercial real estate.
What is your thoughts about near term 2 years/5 year/long term outlook for commercial real estate?
If you could give your opinion on various types of commercial property, that will be great.
Thanks in advance for your opinion.
Srini
In Buying Property - Asked by Srini P. - Jun 22, 2009
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Answer(s)

Paul S.
Broker/Agent
Glendora, CA

Srini
You are asking a question that has potentially a very long answer. In the past every economic downturn has anegative effect on commercial. It only makes sense that when businesses suffer the need for commercial space declines. Commercial is in fact suffering and inventories are growing. Basic supply and demand principals apply. The supply is growing and the demand is declining. A Gap study can be done estimating the gap between supply and demand on specific types of property in specific areas. It would be safe to say that every article that has been written recently estimates negative absorption. That translates to an oversupply. Oversupply usually means lower prices, greater vacancy, lower rents. Cap rates are rising as well which means investors are demanding higher rents or yields relative to the price. One would have to be quite brave to project out 5 years in this forum. At some point things turn and get better. It does not appear we have bottomed.

Jun 22, 2009
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Srini P.
Owner/Investor
San Jose, CA

Thanks Paul.
Any advise for new investor in this environment? Wait for some time to see the trends?
what is the good CAP rate in this market?

Jun 22, 2009
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Paul S.
Broker/Agent
Glendora, CA

The time to invest is when the crowd doesn't want to. You buy low and sell high and the crowd usually does the opposite. There are great opportunties now. Are there better ones around the corner? Maybe? Usually everyone misses the top and the bottom of a market cycle. Why? Because you can't tell it has happend until after it actually does. So waiting may cause you to sit on the sidelines only to miss the upturn. Find something that looks stable and has a good prospect for the future. Interest rates are low if you can find a lender willing to lend, something that may not be the case down the road. A great interest rate is wonderful for you bottom line. Call me if you would like more info. 800 554-7362 ext. 209, it's free.

Jun 23, 2009
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