Commercial Real Estate and REITs

I recently read an article in the Wall Street Journal claiming that the ups and downs of a REIT’s share price can predict, in the short term (next 12 months), what’s going to happen in the commercial real estate market. (WSJ, 1/26/08, page B3). Although, you can’t always predict the future, as shown by another article in the Journal on the same day (see page W8).

If a REIT’s share price can predict what’s going to happen in the commercial real estate market, the commercial real estate market is headed for a downturn and some say the drop will be dramatic. Most of this drop will be fallout from the ongoing credit crisis.

This is actually good news for the small investor, assuming you can get financing. Thanks to the 1031 market’s demand for smaller commercial properties (strip centers, triple net retail locations, small office and industrial buildings), prices have been driven up and therefore returns have been lower. With prices coming down across the board, maybe there will be a chance for better returns. The bottom line, however, is that if you are in it for the long haul, its always a good time to buy as long as you do your due diligence, have a good location and have strong management. It doesn’t hurt to be a little creative and a little lucky too.

Here we go.

This is my first attempt at blogging. Hopefully more of you will join and we can help each other navigate the frontlines of residential and commercial real estate. Let's talk about every aspect of real estate, including single family homes, apartment buildings, shopping centers, short-sales, foreclosures, land development, tax certiorari, office leases, etc... Let's talk about the legal, business and market related issues associated with each of these topics.

I am here to help you and hopefully you can help me too.