Expect Credit Woes to Hit Real Estate Investments

12:00 AM CST on Friday, February 15, 2008

Last year was a boom time for real estate investment. But don't look for a repeat in 2008, analysts say.

North American commercial property purchases jumped 49 percent in 2007 to $416.2 billion, according to a new report by Cushman & Wakefield Inc. That compares with an estimated worldwide total of $930 billion – a record.

But forecasters are calling for a 17 percent drop this year because of problems in the credit markets. While debt is an issue, there are still buyers with cash. "There remains no real shortage of equity capital, and many overseas investors are coming into the market to take advantage of buying opportunities offering long-term value," Chris Lowery, C&W's global head of capital markets, said in the new report. He goes on to predict that "if the debt markets recover, we can expect to see prime real estate perform well, particularly in the second half of this year."

As nationwide commercial property buys soared in 2007, the Dallas market was already cooling. "The investment sales market is likely to finish at $2.8 billion in 2007, compared to the all-time record of $3.6 billion recorded in 2006," said Steve Harriss, assistant director of research services in C&W's Dallas office. "Liquidity in the debt market diminished in 2007 due to the subprime turbulence. "Investment sales slowed during the second half of 2007, with many sellers looking towards the first quarter of 2008 to begin marketing their properties."

Source:  Dallas Morning News