The Median Price paid per SF in 2006 for the following Property Types are: Office: $139; Industrial: $67; Retail: $126; Apartment: ($87,500/unit). The Average Cap Rates for each in 2006 were: Office: 7.2; Industrial: 7.4; Retail: 7.0; Apartment: 6.3 -- so what? So Cap's remained strong in '06 even in the fact of the Fed's rate hikes during the year.
The "boom-let" in medical office investment properties in the US calls for a few cautions.... Look closely at the cost per SF in the specfic city or state you locate a target medical investment.... Find out if the net lease rate being quoted and signed in current leases is sustainable over term.... Use care now not to overpay in a market area that is peaking or will peak on rental rates within the next ten or less years.... Analyze hospital locations in regard to the investment property -- and how aggressively the hopsital medical building space will be leased over the base terms of inititial leases in the investment subject property.... Just thinking.
A recent Marcus & Millichap article pointed up these investor thoughts and plans for 2007. (1) An unforseen economic shock is the top investor concern with cost of building materials second; (2) 6 of 10 investors plan to increase their commercial investments this year; (3) 6 of 10 expect effective rents to increase; (4) Most expect Caps for Apartments to rise this year; (5) Just less than half expect an increase in effective rents at Lifestyle/Power Centers; (6) 2 to 1 believe the economy will be weaker, not stronger a year from now.
These 2007 Investment Property predictions by 5 US economists are interesting.
Industrial Properties: Vacancy Rate ( 9% vs 9.7% in '06); Rental Rate (3.6%+ vs 1.5% in '06) Net Absorption SF (233 Million vs 211 Million in '06)
Multi-Family: Vancancy Rate (5.3% vs 5.2% in '06); Rental Rate (5.0%+ vs 4.8% in '06); Net Absorption in Units (203,000 vs 262,000 in '06)
Office: Vancancy Rate (12.2% vs 13.0% in '06); Rental Rate (8.3%+ vs 5.5% in '06); Net Absorption SF (70 million vs 74.5 million in '06)
Retail: Vacancy Rate (8.2% vs 8.2% in '06); Rental Rate (2.6%+ vs neg 1.4% in '06); Net Absorption SF (16 miiion vs 3.9 million in '06)