The 10-year treasury yield climbed to 5.25% on June 26th but over the next 3 months it declined steadily. This trend has surprised many economic forecasters and pleased borrowers. By late September the 10-year note slipped to 4.6%. Oil futures may be part of this...but, the bond market may be betting that 2007 will be weaker economically than the stock market is thinking. The investors we assist like falling interest rates. But, as rates falll will we see Cap rates firm...or even begin falling...
A recent CoStar advisory indicates that after posting 10 consecutive quarters of decreasing overall vacancy because of continued absorption and moderate construction, the US office market showed steady improvement in the 3rd quarter. This included 28,523,205 SF of net absorption. The 3rd quarter closed with an 11.6% office vacancy rate, the lowest in nearly 3 years. "Happy times are here again. the skies of grey....." you know.....
CAP rates have moved up some last quater. The Fed now seems to be thinking of rate cuts in overnight funds rate...maybe in 1st quarter '07. What will this mean for CAP's? Will they again begin to move down? Probably not soon...at least until the Fed plays it hand and actually begins rate cuts. CAP rates lag Fed moves...and there is more to a CAP rate than just Fed rates. Some investors see CAP rates as an "art" and not as a "science." Real estate investment profit is made at purchase....not at disposition.
Public Storage, Inc. of Glendale, CA recently acquired Surgard Storage Centers, Inc. for $5.5 billion. Surgard had 483 domestic centeres in the US and 150 centers in the United Kingdom plus others around the world. Public Storage is the self-storage business with the largest storage market. It is almost 3 times the size of its nearest competitor. Public now owns 1,984 storage centers. What's in your attic that need storing?