Commercial real-estate has taken another leap recently, with prices reaching records highs the market hasn’t seen since 2009. This recent boom in activity is being attributed to a great many things. Some feel that low-interest rates and a massive injection of capital explains the surge in business, while others feel that an uptick in foreign market activity is the reason for this shift. Whatever the case, everyone is holding their breath for fear that the crash of mid-2000 has returned to rear its ugly head.
In cities around the world, valuations of prime real-estate are hitting record highs. With overall dealings increasing 36% from prior years, the commercial real-estate market has already reached $225.1 billion in annual transactions. This level of activity has many concerned, as its kind hasn’t been experienced since shortly before the crash.
Foreign markets are lighting up, too. China’s Anbang Insurance Group recently acquired New York’s Waldorf-Astoria for $1.95 billion, and rival Chinese insurer, Sunshine Insurance Group, purchased the Baccarat Hotel for $230 million. European buyers recently joined the real-estate mania, with U.K. firm M&G Real Estate acquiring a vacant office building for €90 million.
A massive turnaround from the days of the crash, investors are using more of their capital in real-estate than from the past few years, combined. U.S. pension funds that suffered greatly during the crash are investing more in the market. Analysts have noted that an average investiture of 6.3% in 2011, has grown to 7.7% of assets invested in commercial properties.
Whatever the case may be, this unexpected rise in market activity has many jumping with joy. With the valuation index reaching record heights, blowing past the 2013 high and setting a record at 118 last week, analysts are torn between ecstatic hopefulness and concern or the potential threat of an interest rate hike. For more on the story, click here.
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