What is your take on the Florida market?
The investment sales market has clearly turned, both in the state of Florida and across the Southeast. In 2009, the market bottomed, 2010 saw a modicum of success, 2011 was a recovery period and in 2012, we remain cautiously optimistic that the investment sector will make a full-fledged comeback. Judging by current pricing, cap-rate compression and the number and dollar value of transactions trading, we expect to approximate the investment sales cycle experienced in 2007. With the Fed vowing to keep interest rates low for two or more years, demand for hard assets has increased across Florida and elsewhere. There are not enough well-located, prime properties to satisfy capital-rich institutions and large private-party investors. Currently, multifamily properties are receiving multiple qualified bids and offers, with terms and underwriting that are reminiscent of 2007. Whether targeting apartments, shopping centers, office buildings or hotels, it's a great time to be a seller and, conversely it's a great time to be a buyer.
Check out "StreetSmart," a blog by Berman's colleague Hessam Nadji, at globest.com/blogs/streetsmart
Why are auctions gaining popularity right now?
In this market, where true asset valuation is difficult to determine, auctions provide a transparent platform for price discovery. Commercial real estate properties, and the notes secured by them, are in great demand at the right price. Auctions not only provide competitive bidding by interested parties to achieve market price in any economy, they also bring national buyers to regional marketplaces that are often overlooked. In addition, an auction provides a set sale date, avoiding the offer/counter-offer process that can go on indefinitely in the traditional process. This eliminates contingencies and turns offers and counters into competitive bids. The result is an efficient market value sale. The auction platform also allows banks, special servicers, financial institutions, owners and brokers to include an individual asset or a portfolio of assets in an event and leverage the attention generated by the aggregation of properties for sale. Simply put, auctions are gaining popularity because the market demands it.
Auction.com's Thought Leadership page on Globest.com is globest.com/auctiondotcom
Where do you see cap rates going in the coming year?
Within office, CBD cap rates have moved down nationally, so that the average cap rate is about 5.75% right now. Overall, in the entire office sector we've seen a bump up a little bit primarily due to an increase in the suburban markets. We'll have to watch where the job growth is going to occur. Most of the major initial trades this year are in New York and San Francisco, which are the two hottest markets. The suburban markets will probably be fairly flat for the year. The apartment sector is averaging about 6.5%, which is up about a quarter of a point from the fourth quarter of last year. We continue to see unbelievable record lows in the gateway cities. You're seeing a lot of competition, and with the cost of capital being so low you're seeing a good arbitrage on cap rates. The multifamily sector continues to be the preferred asset class by quite a bit. We're seeing nice growth in absorption in the industrial sector, and there is an appetite among institutions to own.
To learn more about Transwestern's investment services, go here: transwestern.net/Services/Pages/Investment-Services.aspx
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