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BarCap sees early year positives in commercial real estate

Commercial real estate transactions for 2012 are off to a good start despite a decrease in January’s average cap rate, or the rate at which a commercial property generates income, equity researchers at Barclays Capital (BCS) said.

Real Capital Analytics released CRE data for January on Feb. 23 showing a 15% increase from December in year-over-year transactions at $12.9 billion.

This positive year-on-year trend, which followed November’s 8% increase, appears to be consistent with RCA’s projected 50% yearly growth for the 2012 year.

While the 7% average cap rate for January was down 5 basis points and 25 bps — the largest drop since December 2008 — equity researchers attribute this decline to the first quarter usually being the weakest of the year.

Optimism still remains for real estate brokers, CBRE (CBG) and Jones Lang LaSalle (JLL), because the cap rate spread remains wide over 10-year Treasury — potentially leaving room for further cap rate compression so long as the risk-free rate of return remains minimal, the analysts write.

“The January volume reported by RCA suggests a run rate comfortably ahead of our expectations,” the equity researchers said. “The firm asset pricing can also be viewed as a positive indicator for brokerage revenues.”

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