The following is a blog post I received today from Good News Friday Grubb & Ellis Corp. Office.
“Equity investment capital targeted for commercial real estate has been sitting on the sidelines for well over a year. A number I heard at last week’s Urban Land Institute conference was $150 billion, which could be leveraged higher if only leverage were available. Now it appears that debt is coming back according to an article posted this week on LoopNet (click here). Traditional lenders are offering better terms while new players are entering the market. According to the article, “While trophy properties in major markets are seeing most of the increased lender interest, assets in secondary markets are also attracting stronger interest.
This graph from Real Capital Analytics seems to support that view. Cap rates have already turned lower in primary markets and seem poised to turn lower in secondary and tertiary markets. This trend is based on low deal volume, but volume is starting to rebound, up 25 percent in the first quarter compared with the very low base in the first quarter of 2009.
It’s hard to believe because the market seemed frozen as recently as six months ago, but buyers, sellers and lenders, while not all on the same page yet, seem to be moving in that direction.”
Source: Robert Bach , SVP, Chief Economist , Grubb & Ellis , 312.698.6754
This was written reflecting the national market. One has to remember each market is different and changes at it’s own pace due to local influences. Our own market in northern and central Wisconsin is still reflecting a Cap Rate of 9.5 % – 10.5%.