Institutions losing faith in commercial real estate

Several big funds sold more than they bought

New York /
Feb.February 07, 2017 10:29 AM

Big institutions have begun selling off commercial real estate — another sign that the market is weakening amid rising interest rates and a surge in new supply.

Firms like Brookfield Asset Management sold more properties than they bought last year.

“We definitely have a risk-off mentality,” United Parcel Service Inc.’s pension fund portfolio manager Judy McMahan told the Wall Street Journal. “We’re being careful.”

The uptick in seller interest comes as demands for trophy properties shrinks. Over all commercial real estate sales volume fell by $58.3 billion, or 11 percent in the first half of 2016, according to Real Capital Analytics, marking the first dip since 2009.

Brookfield sold a net $3 billion in real estate last year and plans to sell another $1 to $2 billion this year. It is currently marketing a 49 percent stake in Manhattan’s Brookfield Place office complex. “We think now is an opportune time to reduce some of our exposure to that asset,” the firm’s senior managing partner Brian Kingston told the Journal. “We can recycle the capital into higher returning investment opportunities.”

There are two main reasons why large institutions are less bullish on acquisitions: rising interest rates, which make bonds look more profitable compared to real estate, and a surge in new construction that is increasing supply and pushing down prices.

A benchmark index compiled National Council of Real Estate Investment Fiduciaries shows that real estate returns still rose in 2016, but at a sharply slower pace than in years prior. [WSJ]Konrad Putzier 


Related Articles

arrow_forward_ios
With a cooling trade war, stocks perform well, including real estate. (Credit: iStock)
Real estate stocks push up this week as U.S.-China trade tensions ease
Real estate stocks push up this week as U.S.-China trade tensions ease
416 West 25th Street and Maverick Real Estate Partners principal David Aviram (Credit: Google Maps and LinkedIn)
Chelsea landlord claims “predatory” lender is charging a crippling interest rate as punishment after losing foreclosure case
Chelsea landlord claims “predatory” lender is charging a crippling interest rate as punishment after losing foreclosure case
Southampton Town supervisor Jay Schneiderman (jayschneiderman.com, Google Maps)
Southampton Town considers buying 40 acres
Southampton Town considers buying 40 acres
Alan Feldman, chief executive officer, president & chairman of the board, Resource REIT; Stephen Schwarzman, chairman, ceo & co-founder, Blackstone (Resource REIT, Getty Images, 1000 Spalding Apartment Homes)
Blackstone to pay $3.7B for REIT in latest rental push
Blackstone to pay $3.7B for REIT in latest rental push
360 Kingsland Avenue in Greenpoint, Brooklyn (Google)
Sitex Group pays $30M for Greenpoint industrial property
Sitex Group pays $30M for Greenpoint industrial property
(Getty)
Intel investment in new Ohio chip plant could reach $100B
Intel investment in new Ohio chip plant could reach $100B
In the days after Hong Kong circulated its latest virus measures this month, several shops, bars and eateries said they would close (Geology.com, iStock)
Hong Kong businesses struggle with fallout of city’s zero-Covid policy, supply chain woes
Hong Kong businesses struggle with fallout of city’s zero-Covid policy, supply chain woes
No Joke: Pete Davidson (left) and Colin Jost just purchased a Staten Island Ferry boat. (Getty)
Floating real estate: Colin Jost, Pete Davidson buy Staten Island Ferry boat
Floating real estate: Colin Jost, Pete Davidson buy Staten Island Ferry boat
arrow_forward_ios

The Deal's newsletters give you the latest scoops, fresh headlines, marketing data, and things to know within the industry.

Loading...