The split in the commercial real estate (CRE) market continues to widen, with historically high prices being paid for institutional properties in top markets, while other markets have little or no activity except for distressed property sales, according to the third quarter activity report from the CCIM Institute and the Real Estate Research Corp. (RERC).
"The good news is the institutional markets are typically a leading indicator to change in the secondary markets, and we expect to see additional activity in more of these markets over time," said Ken Riggs, president and CEO of the Chicago-based RERC and the CCIM Institute's chief real estate economist. "The gap between bid-ask is still too wide in many cases, and until buyers and sellers come closer together, actual transactions will remain sparse."
On a 12-month trailing basis, there is significantly greater total volume, with the hotel sector up nearly 50% and the retail sector up 15%.
But showing the dichotomy in sales, there was a steady increase in sales over $5 million for all property sectors, but transaction activity involving prices under $5 million remains flat.
CCIM Institute president Frank Simpson said "the challenge for investors remains finding the right properties at the right price with the best return potential."
By property type, CCIM members give the highest investment conditions rating to the apartment sector, at 6.0 on a scale from 1-to-10.
The industrial sector received a rating of 4.5, while both the retail and hotel sectors received a 3.9 score and offices were the lowest at 3.8.