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Investors See Light at End of Real Estate Tunnel

The mood among commercial real es- tate investors is generally improving, according to a report from Pricewater-houseCoopers (PwC).

PwC’s most recent quarterly “Korpacz Real Estate Investor Survey” reveals that investors are more bullish on a recovery in the commercial real estate market than they have been at any point in the last two years. For example, PwC noted that overall cap rates have “stabilized.” From the market peak in 2007 to the end of 2009, the aggregate average overall cap rate reported by survey participants had ballooned from 6.87 percent to 8. 49 percent. In the first quarter of 2010, that figure actually ticked down to 8. 42 percent, and respondents said they expect cap rates to “hold steady” in a majority of markets.

Stiff competition for premium assets is having an impact in this regard, according to the report: “Helping to stabilize overall cap rates, and even compress them a bit, is plentiful capital targeting a very small pool of quality offerings.”

While the expected swell of distressed assets coming to market hasn’t been as quick as many had hoped, investors remain confident that dwindling income streams and a difficult borrowing market will bring attractive buying opportunities to the market before long, according to the report.

know [how]

WITH PHIL HAWKINS

President and CEO, DCT Industrial Trust (NYSE: DCT)

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How are market fundamentals shaping up for the U.S. industrial REIT sector?

Phil Hawkins: “They’re beginning to improve. ‘Stabilization’ is actually the word I would use. Net absorption—or the change in occupancy—was decidedly negative for the last 12 months and has been much less so recently. Rents are beginning to bottom. As a result, I’m much more optimistic about the fundamentals that we’ll be operating in during the next 12 months.”

To watch a video interview with Hawkins, visit REIT.com.

WITH SKIP MCKENZIE

President and CEO, Washington Real Estate Investment Trust (NYSE: WRE)

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How does a narrow geographic focus benefit your company?

Skip McKenzie:“We believe real estate is a local business. You need troops with boots on the deck in a region. It allows us to respond to problems. It allows us to seek out investment opportunities. It allows us to meet with brokers and tenants on a moment’s notice to respond to their needs.”

To watch a video interview with McKenzie, visit REIT.com.

WITH KEVIN RIORDAN

President and CEO, CreXus Investment Corp. (NYSE: CXS)

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Why is this a good time for a company to start investing in commercial mortgage debt?

Kevin Riordan: “We looked at the macro-environment in terms of financial providers of capital. We saw that the suppliers of capital were clearly going to be constrained. In fact, some were going to be out of business. On the other side of the equation was the demand for capital. If you look at the mountain of debt and the supply of capital, clearly there was a mismatch. We are attempting to fill that void of capital required.”