Monday, February 16, 2009

Why commerical and retail real estate arent the bargin they seem to be

With commercial and retail yields rising dramatically in the last several months people have started to dive in and buy at 8-10%.

Why do I not think this is a good idea?

This market didn't just dry up so quickly as a result of the capital markets failure as you might initially think, what has really hit this market is that the economy is so unstable that one cannot guarantee the liquidity of any companies. With major banks collapsing, nothing is safe, a bank portfolio was always considered about as safe as treasuries and had yields to match. I personally wouldn't want to own the definitive bank property in Bear Stearn's HQ in Manhattan re renting a couple of hundred thousand square feet........

That doesn't mean to say that in 18-24 months this wont be a great strategy, once we have seen alot of major companies file for bankruptcy and reorganization the shake up should leave for some great opportunities

Copyright Jonathan Rose 2009 - Creative Commons License

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