-- The Urban Land Institute reports that the “sustained performance of the U.S. commercial real estate industry is expected to continue in 2015, fueled by improving fundamentals and robust investor appetite – both domestic and foreign, according to Emerging Trends in Real Estate 2015, co-published by PwC US.”
“Unlike previous reports and previous cycles, the industry is experiencing sustained growth,” said Mitch Roschelle, a PwC partner and U.S. real estate advisory practice leader.
Leslie Pappas, a 32-year investment and real estate veteran, has participated in over $3.5 billion in real estate transactions. “There is substantial movement in multifamily investments,” she reports“ and there are lots of reasons why. Demand for multi-family apartment rentals is up due to interest from adults 21-30 and retirees looking to downsize and secure their retirement. As a result of increased demand, Accredited Investors are moving into private placement real estate offerings, thereby providing a potential hedge to their portfolios against possible downturns in stocks and bonds. In addition, investors can sell investment property and avoid capital gains taxes at close by performing a 1031 exchange, with many reinvestment alternatives. In fact, according to current tax laws, it's possible to eliminate all capital gains tax by sequentially 1031 exchanging properties until death.”
David Payne of Kiplinger writes: “There’s more potential for an upside surprise than a downside slide. As job growth returns and consumers feel more secure, spending increases may well be triggered, pushing growth over the 3% mark. Even if the momentum isn’t great enough for that to happen in 2015, it’s a good bet that it will be by 2016,” Payne adds.
“Healthy third-quarter growth of 3.5% plus an upward revision of second-quarter growth confirm that economic momentum is back on track. In the fourth quarter and into 2015, growth should continue at a 3% rate. Consumer confidence has been gaining strongly.”
What’s driving the strong growth is a favorable supply-demand balance combined with investors’ increased desire for commercial real estate. The recovery is being headed by a demand in multi-family housing and self-storage units, including modest growth in regional malls. The mixture of low interest rates and economic growth has thus caused commercial real estate to outperform the wider U.S. stock market.
According to the National Association of Real Estate Investment Trusts, exchange-listed U.S. equity REITs rose 16.2% while yielding a dividend of 3.5% during the first six months of 2014. Contrast these figures to the 7.1% equity rise and 2% dividend yield of the S&P 500 Index over that same time frame. In addition, while low interest rates are harming investors in general, they are helping REITs and commercial real estate in general.
“Many real estate owners have accumulated equity in their properties for decades,” observes Ms. Pappas. “A couple the firm worked with earlier this year, accumulated over two decades of equity in a high-priced Silicon Valley home, yielding a 1.53% annual cash return. Of the $1.2M net proceeds from sale, they were able to invest substantially in three different multifamily properties in three cities with an average projected rate of return of 5.75%. Archer was able to increase their projected cash returns by 370% while diversifying their real estate holdings, potentially providing added safety.”
“And it looks as though investments like this will be a good bet for the next decade,” Ms. Pappas adds, “considering the collective advantages of increasing multifamily demand, tax-free exchanges, bonus rents, appreciation, depreciation, and other factors.” For many accredited investors, therefore, the time to look at real estate private placements may be now.
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Leslie Pappas of Archer Investment Advisors is an Investment Advisor, a Registered Securities Principal DPP and a Real Estate Broker in several states. She has over 32 years of experience in investments and real estate, and has participated in over $3.5B in real estate transactions. Leslie is a Certified Commercial Investment Member, a credential that only 10,000 practicing commercial Real Estate Brokers worldwide have achieved. Leslie has an MBA from NYU and a BA from Vassar College.
Contact Info:
Name: Leslie Pappas
Email: Send Email
Organization: Archer Investment Advisors
Phone: 650-430-4333
Website: http://www.archerinvestors.com/
Release ID: 68337
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