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Investors are turning to core commercial real estate

The real estate downturn in 2008 has left many investors taking the cautious approach when it comes to the purchase of property. This is in part because many high-risk property fund managers went under during that period - especially ones that relied upon debt financing. It is for this reason that investors are increasingly interested in core real estate.

The increased demand for what are called "core" buildings has resulted in decreased returns. However, with the lower risks that come along with investing in these properties such core locations are bringing in investors that are looking for a hedge against inflation.

Though some of the better investment properties have been picked up, there are still a large number of opportunities for investors to take advantage of. And according to the Open-end Diversified Core Equity Index, three-year net returns through 2013 are considerably higher than they have been during the past four decades. The returns on commercial real estate involving core buildings has in many ways thus compared favorably to those of corporate bonds.

Core buildings are also said to carry relatively lower debt levels than many opportunistic (high risk/high return) assets. As real estate investment as a whole amounts to around $29 trillion in value, the majority of this would include core assets.

When we are talking about commercial real estate investments of this kind, advice and representation by lawyers experienced in this area is badly needed. The services needed include much more than just representation when it comes to the purchase and sale of a piece of property. It can also require advice concerning financing, development and construction, leasing, tax issues, title issues, compliance with zoning and environmental laws, etc. These lawyers are needed in all aspects of a commercial real estate transaction.

Source: Bloomberg Businessweek, "Office Towers Better Than Bonds Luring Global Investors," Hui-yong Yu, March 11, 2014

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