Are property valuations chasing future rent increases?
INDEPENDENT PERSPECTIVES: Are property valuations chasing future rent increases?
First, let pictures (charts in this case) speak their 1,000 words.
Commercial property market valuations, in almost all categories, have eclipsed 2006-2007 picks.
Valuations are even higher in key markets like Tri-State, Boston, Washington DC, Southern California and San Francisco.
" Capitalization rates have dropped to historical lows of 3% to 4% for industrial and multifamily deals in particular." Orange County Business Journal wrote on March 16, 2015.
Yet the largest and most sophisticated investors, led by pension funds, private equity funds, and insurance companies, are in the midst of buying spree.
The rational on the part of buyers? Potential rent increases in the near future. It seems the largest aggregators of capital believe in the continuing economic growth.
Authored by Armen A. Grigorian Manging Partner of Redmount Capital Partners, LLC