Cash Tops Commercial Real Estate as Best Investment Option, Survey Finds
Liquid financial resources, better known as cash, are the best investment options in a risky, uncertain economy, topping office buildings, retail centers, apartment complexes and other commercial properties, according to commercial real estate professionals affiliated with the Certified Commercial Investment Member Institute (CCIM).
Liquid financial resources, better known as cash, are the best investment options in a risky, uncertain economy, topping office buildings, retail centers, apartment complexes and other commercial properties, according to commercial real estate professionals affiliated with the Certified Commercial Investment Member Institute (CCIM).
Cash garnered a 6.7 rating in a survey (with 10 being the highest) ranking investment options, edging out commercial real estate, which earned a 6.1 rating. Bonds received a 4.4 rating, and stocks ended with a 3.4 rating. This marked the first time CCIM members rated any investment over commercial real estate in the past six quarters.
The rating of investment conditions was a key finding of the Fourth Quarter 2008 RERC/CCIM Investment Trends Quarterly, a national commercial real estate market report. Findings covered the three-month period ending September 30.
Ratings from the report — a scale of 1 to 10, with 10 being the highest — reflect CCIM Institute members and other expert views of the overall commercial real estate market, specific property types and geographic regions, and take into account supply and demand, economic conditions, pricing, rental rates and other factors.
CCIM members surveyed rated every property sector lower than the previous quarter in terms of investment potential. The apartment sector — the only safe haven for investor dollars — earned the highest investment conditions rating at 6.2. Since the first economic salvos hit the economy in 2007, apartments have led all property types in this category.
Apartments also led the other key property types in two other categories: return versus risk, where it scored a 6.1 rating, and value versus price, where apartments scored 5.0. The value versus price analysis indicates survey respondents maintain the value of apartment properties are equal to the price paid.
Investment conditions for the other main property types — offices, industrial, retail and hotel — all scored below a 5.0 rating.
The report offered some optimism for commercial real estate. The value of private equity commercial real estate will continue to decline, "however, the severity of price corrections will vary greatly by property quality, property type and property location," it stated. "And, where these are challenges, there are also great opportunities, including purchases of distressed or performing assets that have overcorrected."
From a regional perspective, the East was rated as having the strongest regional economy at a 5.0 rating, followed by the South (4.7), Midwest (4.5) and West (3.9).
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