The investment sales market has been steadily improving over the last few quarters, as fundamentals begin to improve and economic recovery, while sluggish, is upon us. With regard to fundamentals, we have seen rent concessions evaporating and occupancy rates improving. The economy is moving in a generally positive direction but is having difficulty finding momentum as employment growth is well below expectation and last week it was reported that consumer spending experienced a decline of 1.2% in May, the first drop since September of 2009. While the investment sales sector appears healthy, the future of the market, however, is uncertain as market indicators are presently difficult to interpret. These conditions beg the question: Are we in another bubble at the bottom of a cycle?

Today, nothing is impacting the investment sales market more than the supply / demand relationship. Real estate markets are always dependant upon the supply / demand dynamic, however; it appears to be impacting the market more acutely now than we have seen in the past. Presently, there is excessive demand met by a relatively weak supply of available properties for sale.

Demand drivers are active from every segment of the purchasing arena. When we first started to tangibly feel the impact of the credit crisis in the summer of 2007, the institutional capital, which drove up value in the bubble inflating years of 2005 -2007, all but evaporated from the marketplace. The overwhelming majority of investment properties that Massey Knakal closed from mid-2007 until recently have been purchased by with high-net-worth individuals and families that have been investing in the market for decades. Recently, we have seen a reemergence of institutional capital as these investors have formed distressed asset buying funds and opportunity funds to take advantage of perceived opportunities in today’s market. Add to this the significant numbers of foreign investors and we have a demand side of the equation that is overwhelming.