Rankin Commercial Properties released a press release with their latest market insight.
Raleigh-Durham-Chapel Hill, NC (1888PressRelease) September 02, 2010 - Rankin Commercial Properties announced their latest view on Commercial Real Estate Market Conditions today saying that the industry is "Back to Black."
Rankin Commercial Properties a full service commercial real estate firm in Raleigh, North Carolina, has been a market leader in maintaining property portfolios for clients in the South Eastern United States. Rankin Commercial Properties occasionally releases market updates on conditions surrounding the commercial real estate market.
"For the first time in a long time, we are seeing significant activity in the Commercial Real Estate markets that suggest a fall out is no longer expected" said Charles Rankin, President of Rankin Commercial Properties. "Institutional buyers are stepping into investments helping the Dow Jones REIT index significantly outperform the broader market." FTSE NAREIT's All-REIT index, comprised of 148 publicly traded REITs, was up 11.7 percent year-to-date as of Aug. 26 while the Standard & Poor's 500-stock index was down 4.9 percent. Publicly traded REITs represent 15 percent of the total U.S. commercial real estate market.
However, Rankin Commercial Properties forecasted a foreclosure rush earlier in the year which would have offset the scarcity of property acquisition opportunities, which has limited many REITs' ability to grow as the economy recovers. "We thought a fall out would have been a good thing, a great thing for our business, but it never happened, now we are focusing on leasing properties and maintaining properties" said Charles.
Rankin Commercial Properties believes Apartments and Retail properties will outperform the market as Office properties and Industrial Properties begin moving off the bottom. But the fact that the commercial real estate market hasn't crashed is overall positive.
According to Rankin, CMBS loans in 2010 while a fraction of the peak in 2007 have already far exceeded the total for 2009. Commercial Real Estate Sales spiked to $9.7 Billion in June, while commercial property values continued to increase at a premium above current rental rates. The aggregate value of Commercial Real Estate (CRE) loans priced by DebtX that collateralize CMBS increased to 79.4% as of July 30, 2010, up from 77.4% as of June 30, 2010. Loan values were 71.1% as of July 31, 2009. In July, DebtX priced 57,801 Commercial Real Estate loans with a $679.5 billion aggregate principal balance. "The fact is, sum 90% of CMBS loans are performing" said Charles.
July's numbers followed June's where there was a spike in national multifamily and commercial real estate sales, rising to $9.7 billion in the month. This was the highest volume of significant commercial property sales since September 2008. The increase in activity-over the year, from the first to the second quarter and over the second quarter itself-suggests that investors remain largely undeterred by downward revisions to the economic outlook. The current tally of commercial properties in contract suggests that prevailing levels of activity will be sustained into the third quarter.
"Cap rates are beginning to rise significantly" says Charles "from 9 to 10% last year to 7 to 7.5% today, there still could be a backlash and slight double dip, but still we are talking about capitalization rates at all significant highs yielding great commercial property investment opportunities."
"Apartments will outperform the entire real estate industry as renters move back into the community but aren't ready for purchasing a home, a common trend following a recession" said Charles. REITs that primarily own apartment buildings are in a stronger position than those that concentrate on office, retail, and industrial properties. With home prices continuing to fall, and access to credit diminished, renting is the only option for many people who can't get mortgage loans or aren't willing to buy a house now. Occupancy rates for apartment buildings are currently running at 92 percent to 94 percent, compared with about 88 percent for warehouses and other industrial properties and 84 percent for office buildings.
But Rankin Commercial Properties believes the Retail Property market is leaning towards a pop. "US consumers are deleveraging faster than expected, they are cash heavy, and it's only a matter of time before they start spending." Today consumer spending rose slightly as some consumers began fretting off fears of unemployment. "The worst for the retail industry is over, has been over, and as those retailers begin looking for ways to increase revenue and reallocate funds, property leasing activity is going to rise, and higher spending will increase percentage rents."
"In August we saw a pop in Retail sales driven by back to school shoppers and sales tax holidays" said Charles, "that was actually an unexpected improvement." Better consumer confidence numbers, spending numbers, and August sales numbers are all good signs for Retail Properties.
Although Rankin Commercial Properties is bearish on the suburban office space and industrial space, they still had a few positives. "Our entire economy has changed, we simply won't return to the same conditions we had pre 2007, however, one thing is certain and that is recessions are restored with innovation. Innovation requires office space and industrial space, the question is where will that innovation come from, Tech, Medical, Research and Development, who really knows at this point, it's too early to tell" said Charles.
"On a local market level, Raleigh Commercial Real Estate and Cary Commercial Real Estate have several strengths that will help push a recovery in Office and Apartments as Fort Brag expands and DOD contractors search for offices in the Raleigh-Fayetteville areas" said Charles. "Other office space users seem to be temporarily medical and counselor driven, however RTP has seen some significant activity recently from Research and Development type corporations."
"Overall Commercial Properties are 'Back to Black' meaning the cash flows are increasing enough to sustain properties and keep bankers from foreclosing. But significant growth remains weak primarily because the segment is recovering without a washout. We've seen a lot of loans rolled and very few foreclosures in recent months accompanied with stronger leasing activity."
About Rankin Commercial Properties LLC:
Rankin Commercial Properties (RCP) is a Full Service Commercial Real Company. Encompassing all aspects of commercial properties, RCP offers Property Management, Brokerage Services, Tenant Representation, Landlord Representation, Facilities Services, Property Maintenance, Construction, Landscaping, and Cleaning & Janitorial Services. The company currently employs over 13 full time and part time personnel.
Rankin Commercial Properties is North Carolina's Premier Source for Commercial Real Estate Expertise. Our team specializes in Office, Retail, Industrial, Land, and Investment Properties. Unlike most Commercial Real Estate Companies, Rankin Commercial Properties (RCP) is a Full Service Commercial Real Estate Company offering Landscaping, Cleaning & Janitorial, Property Management, Brokerage, Marketing, Maintenance, and Financial Services. Our "all around, hands on" approach not only gives us the knowledge to negotiate fair deals, but the ability to lower operating costs for most investment properties. The Rankin Team has an uncanny ability to creatively and analytically determine proper solutions to every commercial real estate need. Rankin Commercial Properties is devoted to building long term relationships with its clients and community.
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