According to a new report from Pacific Investment Management Company (PIMCO), U.S. commercial real estate prices could be poised to plunge as much as five percent over the next 12 months. After nearly six years of national growth, some analysts fear that the sudden downturn could be hugely problematic for investors who bought near the top of the market expecting foreign interest to continue to grow before the advent of Brexit. However, PIMCO researchers say that the cooling-off period could actually create a “welcome storm” for investors looking for properties at bargain prices. “For flexible capital, this storm might be a welcome one indeed,” they wrote.
One potential issue for commercial investors could be the declining level of activity from Chinese investors, who have been backing off, relatively speaking, in recent months thanks to economic volatility in their own country and a strengthening dollar. Lower oil prices and “dislocated debt markets” are also playing a role in commercial uncertainty. PIMCO analysts called the combination of factors a “blast of volatility for commercial real estate.”
Market volatility doesn’t have to mean you run for the nearest exit. Be very clear about what your strategy requires in a deal, then keep your eyes open!
Point to Ponder:
Do you think a six-percent drop in commercial real estate will affect all commercial sectors?
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Carole Ellis is the host of Real Estate Investing Today, a popular 9-minute daily podcast focused on educating real estate investors about the important topics that will make their investing SAFER, FASTER, and MORE PROFITABLE. She's also the editor of the Bryan Ellis Investing Letter. She has more than a decade's worth of experience in and reporting on the real estate industry and, additionally, has written dozens of courses on the topic. Carole lives in Kennesaw with her husband, Bryan, and four children. She believes wholeheartedly that your best investment is always your OWN education.