Commercial Real Estate Looks Good for 2007

Increases in rents and low vacancy rates point to another good year for commercial real estate in 2007, following a record year in 2006.
By: Ryan Chittum and Alex Frangos: REALTOR® Magazine Online
The bull market in commercial real estate made 2006 a record year, and many believe 2007 will be just as good.

"There's just a lot of cash in the system chasing assets that throw off a yield," says Michael H. Winer, who manages the Third Avenue Real Estate Value Fund. "As long as the liquidity is there, the prices will hold up."

Prices for a square foot of office space were up 17.2 percent in 2006 to $218, from $186 in 2005, according to Real Capital Analytics, a New York research firm. Warehouse and industrial space jumped 8 percent to $68 a square foot in 2006 from $63 in 2005. Retail space, such as malls and strip centers, was up 10 percent.

The increases in rents — up 2 percent in the third quarter alone — and the low vacancy rate, 13.5 percent, further supports the idea that 2007 will be rosy.