According to Emerging Trends in Real Estate® 2011 forecast from PwC and the Urban Land Institute the best bets for Commercial Real Estate 2011 include:

  •  Temper expectations – Buy well-leased core assets and look for 6 to 7% cash flows.
  • Lock-in leverage – Mortgage rates can’t get much lower and cyclical bottom is the optimum time to leverage properties in order to magnify future value gains as property fundamentals ameliorate.
  • Provide debt and recap equity – Players who fill the gap on assets with lowered cost bases can obtain excellent risk-adjusted returns up and down the capital stack, including mezzanine debt and preferred equity, if not loan to own opportunities.
  • Focus on global gateways, 24-hour markets – Everybody wants to be in the primary coastal cities with international airport hubs.
  • Favor infill over fringe – The ‘move back in’ trend gains force as twenty-something Echo Boomers want to experience more vibrant urban areas and aging Baby
  • Boomer parents look for greater convenience in downscaled lifestyles.
  • Patience is a virtue – Transaction activity will increase and more value add and distressed deals will appear.
  • Buy or hold REIT – Survey respondents expect solid cash flowing returns.
  • Buy land – It won’t get any cheaper than now, but prepare to wait for the right development opportunity.

Exercise caution on distressed loan pools – They could be a recipe for disaster if you don’t underwrite the assets properly.

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