CCIM and RERC caution that many characteristics of a trifurcated market will remain in 2011, as the division continues between the top-performing properties, distressed assets, and those properties in the middle.
“Properties are moving,” said Simpson. “What is disappointing is that aggregate prices for smaller size properties are still declining on a size-weighted basis, particularly in smaller markets. Some of this is due to distressed property sales bringing down the average prices. But it also means that demand is just not there yet for many properties—or at least not enough demand to drive up prices.”
The apartment sector reflects where investors are putting their dollars. Total volume increased approximately 30 percent in fourth quarter 2010 on a 12-month trailing basis and approximately 50 percent on a quarter-to-quarter basis.
Total volume for the office sector increased by more than 40 percent from the previous quarter on a 12-month trailing basis, the most of any property type. The increase in volume and price occurred for property transactions of $5 million and above, indicating that the improvement is concentrated primarily for larger office properties in the major markets.
“Although investors are gazing out into the risk horizon in the stock market, they are still looking for safety for certain allocations of their investment dollars,” said Ken Riggs, CCIM, president and CEO of RERC and the CCIM Institute’s chief real estate economist. “And commercial real estate—particularly the apartment sector—is generally safer than stocks.
“CCIM members are more optimistic on return versus risk and value versus price. And although volume is up, particularly for larger properties, it’s disappointing that the aggregate price for smaller-size properties is not increasing significantly, particularly in small-town America.”