Figures released for 2012 show a continued slow and steady recovery for the US commercial real estate sector.
Ron Kaiser, the chairman of the National Council of Real Estate Investment Fiduciaries (NCREIF) stated recently;
“Real estate investment returns have a reputation for stability, and 2012 has reinforced that.”
He went on to say quarterly returns have come in at approximately 2.5 per cent. All property types and almost all geographic regions put up similar numbers.
The volume of sales increased significantly in 2012, which accounted for the strong showing. Sales volume reached approximately $64 billion. This figure represented the highest annual total since 2004, according to the CoStar Group Inc.
Since the market crash, the volume of commercial real estate sales has risen steadily. The activity spiked in December, as investors hurried to close deals before the end of the year. Attractive yields also drew more investors into the real estate market.
According to CoStar’s equal-weighted composite index, market growth heated up in the second half of 2012. It registered 8.1 per cent for the year. The value-weighted composite index, which focuses on more valuable properties, registered only 4.3 per cent growth. These figures are faster than inflation, but lower than the double-digit levels the market attained throughout 2011.
The Moody’s/RCA CPPI showed that office properties in central business districts fared best among investors. On the other hand there was a fall in demand for offices in suburban locations.
Retail properties performed well in the fourth quarter, with a 2.97 per cent total return. The annual return was 11.61 per cent. Hotels were the worst performing sector in 2012 with an 8.23 per cent return.
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