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Commercial real estate investors see values at their peak

The value of commercial real estate varies greatly throughout California, and investors appear to be growing cautious according to the NREI/Marcus & Millichap Investor Sentiment Survey for the third quarter of 2017. A majority of respondents, 71 percent, believed that the price cycle for commercial properties had reached a peak.

Despite concerns that property values have crested, 49 percent of those surveyed possessed confidence that construction levels would increase. They believed that the Trump administration would have a positive effect. Confidence, however, has declined since the fourth quarter of 2016 when 56 percent of surveyed investors expected more construction.

Tighter capital markets and higher prices have inspired a greater level of caution among investors. Many still believe that commercial real estate remains a good investment, but they expect to have to wait a while for the market to heat up again. A vice president at Marcus & Millichap said that many investors view 2014 as the market peak. Currently, people looking for commercial opportunities see the most potential in industrial properties. According to the survey, 47 percent of investors considered it a good time to buy industrial real estate.

Putting together a commercial real estate transaction often requires the analysis of many disclosures and purchase agreement terms. Both parties often must fulfill certain obligations before a deal goes through. Someone involved in a land deal that has problems could work with an attorney to gain legal insights about how to litigate issues like lease disputes, breaches of contract or easements. Legal advice could help the person evaluate the potential risks of unwanted liabilities or barriers to development.

Source: RE Journals, "Are investors still confident in commercial real estate, Trump? Not as much as they were last year", Dan Rafter, Aug. 25, 2017

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