For commercial real estate, opportunity varies by sector.

PositionCommercial

Commercial real estate remains healthy overall, though different sectors show different recovery speeds, according to analysts.

"Assets that were underwater are probably back at the previous [price] peaks," said Jim Costello, senior vice president with Real Capital Analytics Inc. (RCA), New York, speaking at the Mortgage Bankers Association's Commercial Real Estate Finance/Multifamily Housing Convention & Expo last month.

Cap rates also approach or exceed record lows for some sectors, Costello said. "Apartments and central business district office are at or below the previous cap rate record," he said. "So we're clearly seeing a lot of interest in those assets. Investors have been bidding them up. Other sectors like strip retail, suburban office and warehouse have 'run room' to continue to improve."

Victor Calanog, chief economist with Reis Inc., New York, said the hot multifamily market slowed a bit in the fourth quarter, noting that for 2014, national vacancy rates fell by only 10 basis points. Asking and effective rent growth decelerated versus the third quarter; the national vacancy rate remained unchanged at 4.2 percent.

"But if you're looking at a five-year period with occupancies of 94 [percent] to 95 percent, I'm not going to cry for you," Calanog said.

Andrew Nelson, chief economist with Colliers International, Seattle, said young adults continue to have an oversized effect on the multifamily sector.

"Millennials aged 20 to 35 are a little different [than prior generations]," Nelson said. "Look at the homeownership rate. Under-35-year-olds are less likely to buy a home; that's always been the case. This morning we saw that the homeownership rate has been declining since the mid-2000s when prices peaked, but it's been going down much faster for millennials."

He said the overall homeownership rate dropped about 50 basis points but for millennials it fell closer to 800 basis points.

Access to credit partially explains this trend, Nelson said. "But it's also a lifestyle choice," he added. "They [millennials] tend to value flexibility and they are not as sold on the concept of the American dream."

Costello noted that prices for loans made at the end of 2013 averaged in the high fives, "and it has fallen since," he said. "That fall is not what people expected a year ago; we would have expected the 10-year Treasury to continue upward. We had just seen a series of shocks to the economy. Now the one-year Treasury is down to 1.68 percent."

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