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The Autumn Leaves Are Falling, But the Sky Is Not
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by Jason Kruse, CCIM
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10/24/2008 |
Does anyone feel a little unrest in the air? The credit market is in shambles, bankers are shaking in their boots, and it seems that no one knows how long it will take to dig out of this financial hole. The current economic climate is a challenge, but in the world of commercial real estate, there is reason to be optimistic.
Unlike the residential market, there is not a massive amount of foreclosures in the commercial world. Traditional commercial real estate financing did not - and does not - allow the unique and unrealistic loans that were permitted in the residential arena.
Boulder and Broomfield Counties did not overbuild commercial real estate; Boulder in particular has limited opportunities for new construction which helps to insulate the market from oversupply. Vacancy rates in downtown office spaces remain below 10%. The outlying areas as well are still seeing relatively good activity, in part because many commercial real estate loans can be assumed. Also, more owners are providing financing for the buyers of their properties.
As prices have dropped and cap rates have increased, buyers want a safe and tangible asset. As stock certificates are sent to the shredder, commercial real estate is the security blanket many are seeking. I am perplexed as to why some investors are flocking to zero return options when there are sound real estate options that yield five, ten, fifteen percent and even higher returns. Although commercial real estate is not as liquid, the question becomes this: would the investor rather have a positive return over the long haul or a negative return in the short run?
Now is a good time to invest in commercial real estate. As stocks continue to bounce like a rubber ball, real estate remains a much more stable alternative. When the economy does recover, real estate owners will benefit as new jobs are created. Most importantly, historically, real estate is the number one asset class for investment over the long haul.
As we head into winter, the ground will freeze, but lending practices will thaw. The questions of how, and how fast, are yet to be answered; however, with the partnership of an experienced professional able to evaluate this complex market and analyze trends and forecasts, investors can find excellent investment opportunities.
For more information, or to discuss your particular interests, please contact Jason Kruse at 303-339-5049 or jason@coloradogroup.com .
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