According to a report released yesterday by developer CB Richard Ellis (CBRE), U.S. commercial real estate will “perform better than the country’s volatile share market during the current economic downturn because investors value its intrinsic quality”[1]. The report indicates that the firm believes that commercial real estate will “remain a preferred asset class” while the stock market will likely suffer as investors find their results to be less and less predictable. Authors of the report also predicted low lending rates, albeit stricter loans, and that conservative investors will begin to focus largely on “core, income-producing assets in primary markets.” They also predicted developmental difficulties, saying that “new development will have more difficulty getting off the ground.”

However, as usual, all predictions are contingent on economic stability, if not recovery. CBRE and colleagues like Jones Lang LaSalle warn that the commercial market is by no means a guaranteed investment. While CBRE emphasizes that a decrease in consumer confidence could hurt the market, LaSalle’s annual investment strategy report notes a “relative lack of caution” in the real estate market and says that investors are “ignor[ing] distinctions between the fundamentals at work across low-growth and high-growth countries.” LaSalle credits this lack of caution to the instability in other markets that is making any commercial investment look like a good one[2].

Do you think that the suffering in the stock market will ultimately be good for the real estate sector? Just the commercial sector or residential as well?

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[1] http://www.smh.com.au/business/property/us-real-estate-to-outshine-risky-stockmarket-20110814-1isxt.html

[2] http://www.theasset.com/article/20262.html