- October 2011: Vol. 23 No. 9

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Choosy Investors: Capital Remains Focused on Top-Shelf Assets and Markets

by Brad Berton

Capital flows are generally continuing to improve liquidity within the recovering domestic commercial real estate sector. But illustrating the erratic recovery, suppliers of both equity and debt are favoring top-tier office towers and multifamily properties in leading markets — creating notable differentials in capitalization rates and mortgage rates and terms between those categories and locales and, well, pretty much everything else.

Looking at the minuscule 4 percent (or lower) capitalization rates seen with trades of top-tier trophy office and apartment properties of late, one might get the impression real estate capital markets are flowing like it’s 2006 or 2007 all over again.

They’re not — not by a long shot.

But it is clear that income-property equity (especially) and debt investment activity today is generally a heck of a lot more liquid than it was in the dark days of 2009 — and even the latter half of 2010 for that matter.


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