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Analysts: CRE nears bottom, making market ripe for investors

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Commercial real estate is bottoming out, giving investors a chance to nab properties from over-leveraged owners, according to analysts at the real estate investment subsidiary of The Bank of New York Mellon. In this environment, commercial real estate becomes ripe investment territory for eager players, the analysts said. "Having reached what we believe to be the bottom of a historic slide, today's real estate investment market resembles the stock market of March 2009, with broad price indices down by roughly half or more from their peaks without accounting for differences in underlying leverage," the analysts said. Investors can make money on the buy side as property owners reach a precipice where they either have to invest more equity into their properties or sell it, according to the analysts. "The reset basis at which such properties may be acquired enables the new ownership to offer lower rental rates and better improvement-concession packages than comparable properties with greater debt burdens — a significant competitive advantage in periods of weak demand," they said. Investors who choose this path will be entering the market a year after commercial real estate started its "tentative," but uneven recovery. "For the year as a whole, transaction volume of approximately $94 billion represented an increase of 68% over the 2009 total," the firm said. Write to: Kerri Panchuk.

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