Waves of capital and equity flooding today’s market
- Multifamily: This area has been the favored asset class now for several years. This trend should continue in 2015. The industrial and office markets are beginning to recover and will be viewed more favorable as an asset class in 2015.
- Retail: Retail is driven by the location, anchor tenants and the population growth around a proposed building site. These factors will certainly slow down the process and the result will be a conscious effort not to over-build this sector in the near future.
- Equity: Equity is plentiful in today’s market. The institutional and private capital entities are looking for transactions that enable their investors to get yields in the mid-teens on an IRR basis. The competition for quality deals has been extremely keen to say the least and will only continue to drive the economics towards the seller or developer.
- Foreign Capital: The flow of foreign capital is still focused on American’s gateway cities on each coast. While this capital is beginning to look at Midwestern markets, it is still not a major factor in these cities as the private and U.S. based institutional capital will still dominate the majority of equity placements. The larger U.S. based equity funds are definitely looking at secondary cites that may have been overlooked in order to find yield. The price of assets in key coast cities has driven yields down to record low levels. These secondary cities should allow the funds to achieve somewhat higher IRR’s but not without additional risks.
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