Appraisal Podcasts

Bubble, Bubble Maybe No Trouble

From Business Week Online…

“An outfit called Global Real Analytics sent me a study last week that aimed to debunk talk of a bubble in the commercial real estate market. I thought of it again this week because the Wall St. Journal published a page one article on Monday saying that bank regulators were concerned about the sky-high exposure many lenders had to real estate.

The Global report concluced that–after adjusting for inflation– three of four commercial real estate categories showed values below what they were in 1985. Office was down 10%, retail down 5.1% and warehouse, -3.8%. Only apartments have done better, up 43% since the mid-80s. “U.S. commercial real estate is inexpensive by global standards,” the report went on to say. “Is there really a price bubble or is commercial real estate still a bargain? Our answer: Not yet overblown with upside potential…”

Global Real Analytics must have a broker’s license and be badly trying to drum up sales. “This is certainly one of the more idiotic studies I have read,” said one real estate source of mine, who’s been busy selling his buildings at today’s high prices. “The conclusion should not be based on 1985, the height of the bubble, but the mid-90’s, which were a period of stability in many ways. From then to now, inflation adjusted prices in office, for example, increased by 50%.” Indeed, Global’s report shows that office prices have climbed nearly 50% since their bottom in 1993.

As I’ve said in this column before, you can reach all different kinds of conclusions with statistics. To justify values in real estate these days you really have to.”

This entry was posted on Sunday, October 8th, 2006 at 8:32 pm and is filed under Single Family. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.