The Current Commercial Real Estate Picture

September 19, 2011

The NCREIF Property Index’s (“NPI”) second-quarter return of 3.94% was the sixth straight quarter of positive performance and the second strongest quarter of performance since the downturn beginning in September of 2007. While property income level has slowly risen, fluctuating in the 1.25% to 1.70% range per quarter, appreciation of property values has been the primary catalyst of real estate’s positive return. Spurring the underlying property value appreciation is the transaction volume increase, up 132% year-over-year, coupled with cap rate compression.
year£, coupled with cap rate2 compression.

Given the upward trajectory of real estate values, investors have started to wonder if the recovery has gotten ahead of itself, and which segments of the market offer the best opportunities for future returns. In the following, we assess the current recovery as well as future opportunities.

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