Tuesday, January 25, 2011

The End of The Buyer’s Market

The End of The Buyer’s Market

Getting a Net Lease Asset Before The Market Enters Full Recovery Could Be a Good Move.

2010 Hotel Horizons report published by Colliers PKF Hospitality Research. Average room rates, though, were generally flat.

Analysts consider occupancy a leading indicator — it climbs first, then rate increases follow. This year, they say, hotel rates will begin rising again. “We still have a long way to go, but we’re seeing early signs that because of strong demand recovery in 2010, managers are beginning to move room rates,” said R. Mark Woodward, president of Colliers PKF Hospitality Research. “We’re literally at the turning point.”

For travelers, that probably means the beginning of the end of the buyer’s market they have enjoyed over the last couple of years.

Debt investors are wagering that the worst is over for commercial real estate, driving prices on mortgage bonds to the highest in more than two years.

“Investors have gotten more comfortable and have started putting money back into CMBS,” Chris Callahan, head of commercial-mortgage backed bond trading at Credit Suisse Group AG, said in an interview at the Commercial Real Estate Finance Council’s conference in Washington. “It has gone from being the red-headed stepchild to being a viable asset class again.” http://www.bloomberg.com/news/2011-01-25/commercial-real-estate-debt-hits-two-year-high-as-investors-bet-worst-over.html.

Here are the points as we outlined them:

1.The labor market is beginning to show signs of healing.
2.Production is on the rise, albeit from anemic levels.
3.Home sales rose sharply from November to December.
4.Profits are surprisingly on the upside.
5.Financial markets are rallying, to some extent.
6.Core consumer spending, driven by pent-up demand, appears to be regaining some momentum.
7.Factory orders could be picking up from rock-bottom levels.
A common thread in many of these is the sign of some gain from heavily recessed conditions. None of these marks a return to levels we would hope to consider “normal” but they do represent small, perhaps significant, changes. Taken together they lend credence to the notion that the bottom of the crisis has been felt and we are now on the road to recovery, albeit “rocky” recovery.

we also would like to mentions that “Consumers are going to have to remain more defensive than offensive in 2011”. But what about investors? If these signs really point to recovery, this could be one of the last chances to invest in a recessed market. Net lease assets have fared better than most commercial real estate and continue to be a safe bet for the future. Financing still remains tough but for those with the resources, getting a net lease asset before the market enters full recovery could be a good move.

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