Day 11: 12 Days of the KC Market Report: Investment

The Unites States commercial real estate recovery has remained at a slow but steady pace.  The recovery has seen improved commercial real estate fundamentals, an increased number of investment transactions, increased asset pricing, and the abundance of capital in both debt and equity.



With the tremendous amount of equity in the marketplace in 2012, Kansas City and national investment professionals saw transaction volume increase significantly over 2011 and dramatically over 2009 and 2010.  Several factors pushed investment commercial real estate back to the forefront as an investor’s preferred asset class.  According to Real Capital Analytics, 3rd quarter 2012 property sales volume totaled $67 billion, which was a 19% increase over the same period in 2011.  A more important factor for Kansas City and other secondary markets is the increased trend of investor interests in these secondary and tertiary markets to find higher investment yields.  Gateway markets are still seeing pre-2008 competition for “Trophy” assets.  REITs and institutional funds buyers made the most commercial real estate investments in 2012.  Multifamily (as in most years) was by far the most desired asset class followed by industrial, retail and office rounding out the four main groups.

Here are the best bets for 2013:

• Concentrate acquisitions on budding infill locations
• Construct new-wave office and build core properties in 24-hour markets
• Develop select industrial facilities in major hub distribution centers near ports, international airports, and emerging intermodal ports
• Use caution investing in secondary and tertiary markets unless teaming with best local operators with boots on the ground
• Begin to back off apartment development in low-barrier-to-entry markets
• Consider single family housing funds
• Repurpose the surplus of obsolescent properties

Source: “Emerging Trends in Real Estate 2013”

Get the full outlook on the investment market with the 2013 Block Real Estate Market Report.