Nearly two-thirds of investable commercial real estate stock lies outside the United States, and these international markets are more accessible than ever. As pension funds see yields start to wane in the domestic real estate market, they will continue to wade ever deeper into the global markets.
From the Current Issue
Few would argue the commercial real estate market is immune to the effects of current turmoil in the capital markets, but the lodging sector, with overall healthy fundamentals, is proving to be fairly resistant to the spreading infection of national economic woes in large part brought on by the collapse of the subprime residential mortgage industry last summer.
Sir Winston Churchill was once quoted as saying: “In one respect a cavalry charge is very like ordinary life. So long as you are all right, firmly in your saddle, your horse in hand, and well armed, lots of enemies will give you a wide berth. But as soon as you have lost a stirrup, have a rein cut, have dropped your weapon, are wounded, or your horse is wounded, then is the moment when from all quarters enemies rush upon you.”
While the total loss has yet to be determined, the excesses of single-family residential lending have been largely revealed as the latest chapter in the long running story of financial structuring, inadequate regulatory oversight and myriad conflicts of interest. To some, the alchemy apparatus of Wall Street — SIVs, CDOs, MBS, etc. — were viewed as the tools of a golden age of global finance. Indeed, for a time, it seemed as though credit would expand indefinitely, risk no longer existed and the bankers that delivered this golden goose would prosper mightily.
In the late 1980s, the area south of Market Street in San Francisco was pocked with rundown warehouses and empty lots where garbage collected on street corners and transients camped. Perhaps improbably, MacFarlane Partners, an investment and development company, came in and drew up plans for a hip, vibrant neighborhood. They called it Bayside Village. Now that area is one of San Francisco’s most desirable neighborhoods — complete with a nearby baseball stadium, shops and restaurants — where a 460-square-foot studio rents for $1,670 a month.