CRE preferable to stocks, bonds, cash.

Author:Tucker, Michael
Position:Commercial
 
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* Commercial real estate (CRE) rated higher than stocks, bonds and cash among institutional investors looking for opportunities in a slow-growth economy, reported Real Estate Research Corporation (RERC), Chicago.

"It's easy to get drawn into the excitement of the stock-market rally, but we have been here before and most of us remember how many years it took to get back to this level after the market fell in 2009," said Kenneth Riggs, chairman and president of RERC.

"Investors hesitant to wholeheartedly jump back into the [stock] market may be better served by investing in commercial real estate," Riggs said, citing the asset class' stability, transparency, attractive total returns and high risk-adjusted returns.

But those returns could decline slightly this year, Riggs said. RERC's required pre-tax yield rates declined 10 basis points for the office, industrial and apartment sectors to 8.6 percent for office, 8.3 percent for industrial and 7.4 percent for multifamily real estate. And the required pre-tax yield rate dropped 40 basis points for the retail sector, bringing the average down to 8 percent.

RERC's required going-in capitalization rates increased 10 basis points each for the office and apartment sectors, to 6.9 percent and 5.5 percent, respectively. The required going-in cap rates for the industrial and retail sectors did not change, remaining at 6.8 percent and 6.7 percent, respectively.

Still, the institutional investors surveyed by RERC gave...

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