Craig Hill, VP of Grubb & Ellis' Bellevue office, wrote a good deal of the 2002 forecast. "Find me more product," quips Hill, adding, "That's the call for every investment broker in the area." Well-tenanted positively cash-flowing properties are diamond mines. Hill recently began marketing Meeker Square, a $12-million grocery-anchored retail center in Kent. The broker says he's already had a few hundred potential buyers come knocking on the door. "I wish I had ten more just like it," Hill remarks.
The equity market in reversal, some forecasts portray poor returns. Michael L. Thayer, president of Bellevue-based Private Asset Management, tells GlobeSt many experts are painting the securities markets in dull colors. "Just recently two major investment managers have told me they expect overall returns could be as low as five percent over, at least, the next two years," Thayer offers. In response, heads are turning toward the potential of stable real estate income streams.
The Grubb & Ellis report says Federal Reserve Chairman Alan Greenspan's 2001 interest-rate cuts increased the availability of financing and the potential for positive leverage in real estate investments.
Hill expounds, "Real estate looks really good right now compared to alternatives where yields have plummeted with falling interest rates. And, with mortgage rates down, there is a substantial angle to leverage real estate investments." He draws a scenario where a real estate investment yields an 8.5% return--while the property can be mortgaged for 7.5%. "Here," he says, "is where you can enjoy the positive leverage that's generated."
In its forecast for 2002, Grubb & Ellis says values could experience a slight increase, provided financial markets do not exceed current levels. As for the significant amounts of sublease space woven throughout Puget Sound's market, the company says by year-end the "overhang will begin to burn off and vacancies will return to healthier levels."
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