According to the most recent Co-Star Commercial Repeat Sale Indices (CCRSI) that was published last month (April 2014) we are seeing the pricing for low-end properties gaining momentum. In fact smaller commercial real estate deals in secondary and tertiary markets saw their strongest annual gain this past February with a 15.7% jump. It appears both large and small investors alike are shifting their focus to lower quality, smaller commercial properties in non-prime markets.
Although slight, the recent upswing of the economy might be the culprit in the low-end pricing momentum. Simply put, job creation is finally filling all those commercial vacancies we’ve been staring at for the past year or so. These smaller markets are still feeling the pressure credit-wise; that combined with the rising rent trend makes now a good time for investors without credit barriers to invest in multi-family properties.
One has to wonder though, the impact that having a few large investors buy up an entire smaller market will have. Back in 2012 we saw a similar trend in Southern California and in Nevada. Hedge fund investors owned at one time in Las Vegas 25% of all their real estate. While this tactic manipulated the market to report a peak, it didn’t last long. Writer Gary Anderson warns that such situations can “ruin” the real estate market in the long run, and that it is actually middle-class investors who can best compete in the multi-family housing market.
At Kastleman & Associates we happen to specialize in buying multi-family properties, mobile home and RV parks, and vacation rental properties throughout Texas. If you are a seller or broker and would like to discuss a potential property acquisition please contact me at firstname.lastname@example.org.