The commercial real estate market has experience its fair share of economic woes over the last 3-5 years. It is not just institutional and private investors who have felt the sqeeze of the recession, but many banks are sitting on vast portfolios of loans against distressed commercial properties, many in breach of loan covenants.
From peak to trough, commercial real estate values fell on average by more than 40 per cent in the UK and USA, two of the world’s most sophisticated markets where real estate investors are very active. As a result, the number of investors have dried up and those who are forced to sell must do so at a loss.
However, in recent months, there have been a return of lenders and investors to the market, albeit, foriegn investors. consequently, there have been signs of stability in commercial real estate prices.
Of course, real estate is hardly the only asset class to experience boom and bust; stock markets do it all the time. However, inside investors search for niche segments within the market to growth their wealth. to this end, investors in the know, have been switching their attention to wind turbine farms, bio-fuel land, service apartments, 3D cinemas, agriculture land in emerging markets and the likes.
In such sectors, growth is strong, demand for the end-product is high, low acqusition cost and marginal competition. Additionally, such sectors are providing steady cash flow and high returns on investment. So, when one door is closed, another door opens.
