The Real Deal Miami

Commercial outlook shaky: report

July 13, 2010 12:45PM

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