LOS ANGELES—The road ahead could lead to robust economic growth or to a slowdown, each with broad implications for commercial real estate values. In either case, investors should not look to asset appreciation as a given when calibrating their near-term strategies, CBRE's Chris Ludeman tells GlobeSt.com.
Partly this is due to the age of the current cycle, in keeping with historical norms. “As we get longer in the cycle, where there's less cap rate compression, investors rely more on property performance to drive value,” says Ludeman, global president, capital markets at CBRE. 'And that's what has happened.” The increasingly small share that price appreciation has had in the NCREIF Property Index's quarterly returns lately is a case in point.
Accordingly, although cap rates and pricing may vary widely across local markets, on a national basis CBRE's 2018 US Real Estate Market Outlook advises that “the steady income returns that CRE is likely to generate over the period provide a solid basis” for investment strategies “as investors simply wait out the asset value fluctuations.” That holds true regardless of how the broader economy performs over the next few years.
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Paul Bubny
Paul Bubny is managing editor of Real Estate Forum and GlobeSt.com. He has been reporting on business since 1988 and on commercial real estate since 2007. He is based at ALM Real Estate Media Group's offices in New York City.
