Here we go again. Institutional Investors are moving inland as prices for class A properties in major coastal markets hit precession levels or higher. Institutions are flush with money and according to a recent survey IREI (institution Real Estate Inc), the largest tax exempt investors are expected to put $30 billion into commercial real estate in 2011. The survey noted that after a two year time-out, real estate has returned as the number one asset class in terms of delivering the highest risk adjusted returns versus stocks, foreign stocks, venture capital, private equity, etc.
Caps rates for trophy assets have fallen to 6% or below in major coastal market, but are still above 8% in the country’s heartland. As the free market works its magical ways, you know what will start happening to prices between the coasts. I’ve been seeing this over the last couple of months that when a well-located, class A property, or close, comes on the market it’s gone fast. Haven’t we been here before just a few short years ago?