CAP rates will compress in Retail and Office Space?

Question

From reading posts on BP, I'm getting the impression that commercial real estate, specifically retail and office space are in the recovery stage.  So does this mean that we should expect CAP rates to compress in the near future, especially in markets like Miami, Dallas, Phoenix, etc? Thanks.

Eric Odum · Answer

Depends is always a good answer. Real estate markets are local. I don't know how much more areas like Miami plus the Core national markets can compress.  The pricing I see is beyond reason, imo.  Secondary and tertiary markets in Florida have largely not recovered yet and I believe you can still find value there for potential CAP compression, as investors continue to move out from core markets looking for opportunity.

John T. · Answer

@Diem Tran

Here's some global perspective:

Global property bubble fears mount as prices and yields spikehttp://www.ft.com/cms/s/0/7ba6556e-e28d-11e4-ba33-00144feab7de.html

Joel Owens · Answer

I look for suburban markets in warm belt states. I like the demo's and growth.

Urban core is to frothy where foreign investors and retiree account investors want to park money for very small returns.

Lot's of people buy that stuff but the high costs per sq ft if a tenant goes dark the second generational tenant Is much smaller rents. So even with 25% down you are underwater in value.

Joel Owens · Answer

There is no definitive answer but YES I see compression. Medical office and single NNN have already been hot and recovered about 2 to 3 years ago.

Multi unit retail strip centers and regular office has some good buys out now. It is what I am looking at buying this year.

CAP rates will compress in Retail and Office Space?

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