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Commercial real estate looks good for 2007

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The bull market in commercial real estate made 2006 a record year, and many believe 2007 will be just as good.

“There’s just a lot of cash in the system chasing assets that throw off a yield,” says Michael H. Winer, who manages the Third Avenue Real Estate Value Fund. “As long as the liquidity is there, the prices will hold up.”

Prices for a square foot of office space were up 17.2 percent in 2006 to $218, from $186 in 2005, according to Real Capital Analytics, a New York research firm. Warehouse and industrial space jumped 8 percent to $68 a square foot in 2006 from $63 in 2005. Retail space, such as malls and strip centers, was up 10 percent.

The increases in rents – up 2 percent in the third quarter alone – and the low vacancy rate, 13.5 percent, further supports the idea that 2007 will be rosy.

NEW YORK – Jan. 3, 2007 - The Wall Street Journal, Ryan Chittum and Alex Frangos (01/02/07)

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