Weakening CRE Basics Worry Investors

The continued weakening of industry fundamentals even as prices for prime commercial real estate climb has raised concern among investors, according to the PricewaterhouseCoopers Korpacz Real Estate Investor Survey."Even the most optimistic investors worry that the longer the downturn persists, the greater likelihood of widespread income losses," said Peter Korpacz, a director in PwC's Global Strategic Real Estate Research Practice. "Rental rates will fall, vacancy rates will rise, and overall cap rates will fail to offset the resulting drop in income that will occur." Among the report's other key findings are: that apartments continue to be the most sought-after property; that regional malls and well-leased office buildings in key markets were caught in bidding wars in the fourth quarter; that the suburban office market still suffers from a glut of available office space; and that the majority of recent acquisitions by REITs have been in the retail sector, while institutional and foreign investors have been active buyers of office properties. PwC can be found on the Web at http://www.pwcglobal.com.