"The Next Shoe to Drop"
The dollar volume of direct investment in commercial properties soared by 77 percent in the first quarter of 2011 compared with the first quarter of 2010. Last year, the market was depicted by a barbell with investors focusing on core properties in primary, supply constrained markets at one end, and distressed assets priced for a quick sale at the other end. Attracted by higher yields, investors now are taking a fresh look at properties in secondary markets and properties below the trophy threshold. Real Capital Analytics reports that secondary markets captured some of the biggest gains in first quarter volume compared with the year-ago quarter, including Minneapolis, Oakland-East Bay, Phoenix, Seattle, and – most surprisingly – Detroit. These markets, along with the primary markets of San Francisco and the District of Columbia, saw Q1 investment volumes at least double from the same quarter a year ago. Other key first quarter trends:
This is a pretty good performance for an asset class that, 24 months ago, was called “the next shoe to drop.