Offices were the only property type to score a higher "investment conditions rating" in the July through September period than in the previous three months. Institutional survey respondents rated central business district offices at 6.4 compared to 5.6 in second quarter, and suburban office scored 5.7 compared to 5.4 The RERC rating system uses a 1 to 10 point scale to project the investment viability of a property type based upon past market conditions, the national economy, the job market, available capital, interest rates and other factors.
"Although the office sector's absolute level of volatility is the highest among the four core property types, its relative volatility has declined due to capitalization rate compression," said Kenneth Riggs, CCIM, President and CEO of Real Estate Research Corporation. "This provides underlying support for values and offsets income declines.
Nationally, office properties captured 40.8 percent of the dollars spent in third quarter and accounted for 34.1 percent of the total number of deals. The pre-tax yield or internal rate of return for central business district office properties was 8.4 percent and 8.9 percent for suburban properties, Riggs said.
The Fourth Quarter RERC/CCIM Investment Trends Quarterly also revealed:
Hotels continued to hold investors' confidence, charting the only double-digit pre-tax yield at 11.3 percent, a quarterly dip of 20 basis points. The median price per room jumped to $131,900 in Third Quarter from $117,00 in the previous quarter.
"Hotels continue to be the most volatile property type," Riggs said. "But most of the volatility over the next five years is expected to be on the upside."
Transaction data in the Fourth Quarter RERC/CCIM Investment Trends Quarterly was based on a quarterly total of 2,366 closed transactions with a value of $76.5 billion. The data about the sales were provided by CCIM members, RERC contacts in the marketplace, and gathered through public information sources.
