Commercial outlook shaky: report

July 13, 2010 09:00AM

While few analysts can tell the future, investment management firm
Pimco believes it can foretell the nation’s commercial market
performance — and it isn’t pretty. Through a ground-level survey of
more than 100 industry experts, Pimco said it believes that many
commercial investment opportunities currently available belie the
market’s shaky foundation. “Certain sectors have made many observers
and participants optimistic,” the firm said in a recent report,
referring to underpriced investments and trophy properties, “but this
has provided a false sense of clarity on the real level of property
values.” While real estate investment trusts have been able to drum up
cash, driving REIT prices up more than 96 percent between the first
quarters of 2009 and 2010,
the report said, investors have turned much of their attention to
lower-risk trophy properties — and aren’t jumping on the broader
market. Ultimately, even cautious optimism may be premature, Pimco
said. “Capital is clearly returning to commercial real estate, helping
to stem the value decline in the sector,” the firm reported. “[But]
national price indices are misleading when transactions are limited and
fail to reflect the significant uncertainty around property
valuations.” TRD