REITs have taken the lead in commercial real estate transactions in 2011, according to a report from Deloitte LLP.
As the commercial real estate market continues it’s recovery, Bob O’Brien, vice chairman and real estate sector leader for Deloitte, said a bright spot has been the high level of transaction activity, primarily driven by REITs and distressed deals.
REITs “have had the opportunity to do opportunistic deals early on,” O’Brien said. “We have also seen a number of the REITs really get back in the market earlier than other investors.”
Although there’s a difference between the amounts buyers can purchase and the seller’s pricing expectations, O’Brien said lenders and special servicers have brought distressed properties to market. As a result, investors are flush with capital to tap those opportunities. The report noted that with easier access to capital, REITs rose close to $82.1 billion in 2009-2010 to fund opportunistic acquisitions. High-quality assets, especially those in top-tier cities, made up the bulk of the transactions.
He also noted that despite the general economic uneasiness, 2011 has been a positive year for commercial real estate thus far. He attributed the strong performance in part to the fact that commercial real estate was among the first industries to fall on tough times during the last economic crisis. As a result, the industry is further along in recovery efforts.
“Real estate got hit very hard right at the initial downturn, and as a result, it was early to fall,” said O’Brien.
Additionally, a lack of new building has contributed to the positive fundamentals, according to O’Brien.
Other top issues on Deloitte’s radar include macroeconomics, increased liquidity, the impact of financial regulations and a rebound in the Asia-Pacific region, according to the report. O’Brien also showed concern about the “wall” of commercial real estate loans maturing in 2015. Ultimately, though, the most pressing issue facing the market is the timing of the broader economic recovery, according to O’Brien.
“We are really looking at unemployment numbers going forward over the next several months,” he said. (credit reit.com)