Wealthy Individuals Using Under-Mattress Cash to Invest in Commercial Property
Bloomberg reports: Looking for safety from turbulent equity investments and heightened inflation potential, some wealthy individuals are reallocating their portfolios to commercial real estate. In an article on Bloomberg, several recent examples were provided of wealthy investors backing ventures to acquire commercial properties. The article cited Real Capital Analytics (RCA) data in stating that, “High-net-worth individuals invested $2.1 billion in commercial real estate last year, up from $579 million in 2009.” Demand has been particularly high for apartment properties, which can be smaller and less expensive than retail or office assets.
Explaining this trend is not difficult as, while according to the Moody’s/REAL Commercial Property Price Index “Prices for commercial properties have dropped 42 percent since their peak in October 2007 through December,” commercial property yields have rarely been higher relative to other investment vehicles. Remarking on the current investment climate, RCA Managing Director Dan Fasulo confirmed to Bloomberg that wealthy investors are running to commercial property in a number of ways because “Everyone’s looking for some form of inflation protection. They’re buying gold, they’re buying oil, or you can buy property. It has inflation protection characteristics, plus it gives you a check every month.”
Using data aggregated by RCA, Bloomberg stated that the average cap rate on commercial properties (including office, retail, and industrial assets) was 7.2 percent in the fourth quarter of 2010, while yields on many other more traditional investments have been tracking closer to the historically-low US Treasury rates.
To read more on this exciting trends and see if owning commercial property may be for you, please read the complete article on Bloomberg’s site.
View the full article on Bloomberg: Wealthy Individuals Using Under-Mattress Cash to Invest in Commercial Property
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Posted by: Nina Turner