Weak commercial property values and cash flows may make this prediction quite a surprise to some people, except for those buying such property, holding it to profit during the coming boom. Real estate will be the top investment for 2004, in comparison to other fixed-income investments, says the Lusk Center at USC.
“At 6% to 8% currently, real estate yields are the lowest in a decade, but they offer a premium over other fixed-income investments,” says Stan Ross, board chairman of the USC Lusk Center for Real Estate.
He should have also noted that some properties, depending on location, attain gains of 9-12 percent, as can be found in some areas of Florida's Tampa Bay area.
Ross says that the currently low yields for various commercial investment and multi-family properties are accepted by some investors because they know their returns will increase over time, especially when the economy improves and interest in such properties by prospective tenants increases.
Ross also recommends that investors lock in rates for financing for these purchases now, before rates go up, which they are predicted to do so next year. This is wise advice because financing problems are the No. 1 reason commercial real estate purchases do not always make it to closing.
Long term real estate investments are predicted to be strong investment options for institutions, high net worth individuals and investors due to their allowance of high yields, great appreciation, the ready availability of capital, tax sheltering options and "sound" exit strategies.
Information from RisMedia.com was used for this report.
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