Who is Buying and Selling Real Property?

It's no secret that there are more and more Wall Street investors who have entered local real estate markets like ours in Las Vegas.  They are not only buying up huge blocks of residential homes, they are also solidly in the commercial real estate (CRE) market.  It used to be that small investors were an important block of buyers in both market segments, but things are changing.    Why?

One reason is the hit that everything took in 2008 - 2009 so many people were devastated in both the residential market and commercial market that there are fewer qualified buyers in the markets.  Investing in commercial real estate has become something that relatively few people can participate in, and fewer and fewer people are even able to invest in the residential market.

Many who follow the housing markets are making the prediction that the future will see a strong move away from homes, especially large homes, and in fact the thought is that the move will be away from home ownership in general and toward renting since it's easier to find a job if you don't invest in a home.  There is no doubt that fewer and fewer people have made money from their homes and that many have been burnt by the recession.  Is renting and the benefit of mobility worth a higher cost of housing as a percentage of total income?  I guess time will answer that question for us.       

If you have been to Europe you know that home ownership rates there have been 80% in troubled countries like Greece and Spain and 50% in Germany a country with fewer economic woes.  I have read arguments that for our country a health home ownership figure near 64% is about right for stability.  If trends are however now away from home ownership in the U.S. is that is a good thing?  Is having a healthier economy worth having a lower percentage of home owners?  Does the stress of paying mortgage payments really outweigh the benefit that some derive from owning a home?

You have to also ask yourself how things in the residential and commercial real estate (CRE) markets will change over the next several years as baby boomers sell their large homes in favor of smaller ones (downsizing) and sell their commercial real estate in favor of liquid assets.  This appears to me to be a trend that will continue to keep a downward pressure on home prices.

There are a number of articles and books that talk about changing demographics (geo-demographic trends) and how they will significantly change the demand for commercial real estate (CRE).  With capitalization rates down and relatively little capital available to investors, foreign investors and Wall Street investors have been able to take advantage of their cash holdings and acquire safe, niche properties that will likely provide great returns over time.

So if you are the owner of; senior housing, student housing, medical office buildings or other commercial real estate that is likely to have a strong long-term demand there are many investment buyers out there for your property.  If your property is not in one of those special niches, there may be a shrinking number of buyers, and intensive marketing may be required to get the property sold.

Glenn J. Rigdon, MA, MRICS, ASA is an experienced commercial real estate broker and commercial real property appraiser located in Henderson, NV.  Check out his commercial appraisal articles website at http://www.appraisalarticles.com or his profile on linkedIn at http://www.linkedin.com/pub/glenn-rigdon-ma-mrics-asa/1a/30b/879/  His website is located at http://www.appraiserlasvegas.com       

Comments (0)

New comments are currently disabled.