Returns on commercial real estate investment remain positive and have become an attractive investment option, according to the National Association of Realtors.
NAR President Martin Edwards Jr., a commercial broker, said income and capital appreciation returns on commercial real estate are surprisingly strong. “Yields on commercial property have held steady over the last five years,” he said. “Even during last year’s recession, commercial real estate investors saw healthy profits.”
Edwards said positive commercial property returns are in stark contrast to an 11.9 percent decline in the S&P 500 stock index during 2001.
Yields during 2001, including income and capital appreciation, were 6.1 percent in the office market, 9 percent for industrial real estate, 6.6 percent in retail and 9.1 percent for multifamily investments, according to the National Council of Real Estate Investment Fiduciaries Property Index.
“Given the long-term nature of commercial leases, we expect positive returns again this year,” Edwards said. “Unlike the last market downturn, there is not a tremendous surplus of commercial space available. Commercial real estate should be an important part of any large investment portfolio.”
Improvement in the commercial markets typically lag a general economic recovery, according to NAR’s commercial real estate quarterly. “It normally takes a sustained period of economic growth to generate jobs and stimulate new construction of commercial space,” said Edwards. “In the current environment of somewhat higher vacancy rates, savvy investors should be able to find good opportunities to acquire commercial property.”