Construction of speculative industrial properties is booming. Fueled by strong demand, national vacancy rates for industrial space have fallen each of the past several quarters despite a big increase in new speculative industrial construction. This in part is driven by logistics - more and more goods being shipped into the US. Industrial construction this year will approach 100 million square feet. Vacancy rates are now at just under 8%. What a Happy New Year.....
REIT's continue to attact investment with stable dividends. The equity market cap of the REIT industry was just $1.5 billion in 1971. It rose to 9.9 billion in 1986. The market cap climbed to $330 billion in 2005 and the number of REIT's grew from 34 to 197. This represents a major investment market shift since 1986. Value is perceived where return is real.
A recent Global Real Analytics study indicates that real prices for commercial real estate adjusted for inflation are lower today than in 1985. Here's the data....
Office: 1985 - $163.33/SF; 2006 - $145.62/SF; %change = -14.1%
Industrial: 1985 - $31.78/SF; 2006 - $30.65/SF; %chnage = -7.0%
Retail: 1985 - $97.50/SF; 2006 - $92.49/SF; %change = -8.8%
Apartments: 1985 - $52.81/SF; 2006 - $75.82/SF; %change = 43.6%
When adjusted for inflation, real prices (except apartments) are lower now than in 1985.