Despite concerns about rising interest rates and a slumping residential real estate market, commercial investments remain a viable option for investors, according to a PricewaterhouseCoopers survey released Monday.
“With the overall economy showing continued strong gains in employment, as well as high levels of consumer confidence, investors seem poised to continue their long-standing infatuation with the U.S. commercial property markets,” said William Croteau, U.S. real estate sector leader for PricewaterhouseCoopers.
The report — which provides a quarterly outlook for 14 of the nation’s top markets — indicates growth in the major commercial sectors, including office, industrial and retail.
For example, overall transactions in the office market were up by 10 percent in the first quarter of 2006 over 2005, with New York City, Chicago and Los Angeles leading the pack.
The Washington area — with its seemingly unstoppable job market — is in sync with the findings of the survey, said Elizabeth Norton of Delta Associates, an Alexandria-based commercial real estate research firm. Developers broke ground on 5.7 million square feet of office space in the Washington metro area in the second quarter — up from 2.3 million square feet in the first quarter.
“Property performance is doing so well because of job growth,” she said. “It’s a safe market to invest in.”
Even so, the profile of the investor has changed slightly, according to the report. As rents increase, fewer leveraged buyers are taking the plunge, but all-cash buyers — such as pension funds — are picking up the slack.
The hire and the house
» Steady employment growth is one of the primary reasons for the hot streak in the commercial real estate market in the Washington area. In 2005, the region added nearly 27,000 jobs in the professional and business services sector. The government sector added nearly 8,000, while the financial sector added 3,600.
Source: Bureau of Labor Statistics
