CBRE August Cap Rate Survey

Tyler Durden's picture

The monthly CBRE August Cap Rate survey is out, and unlike recent months, the outlook for commercial real estate is turning more dour. CBRE's commentary: "As the US economy slows from its growth over the past six months, activity is expected to be more moderate for the remainder of the year. This is partly due to the fact that a few government stimulus programs are coming to an end, along with the fact that job growth remains slow. According to the gross domestic product is expected to grow 2.7%, which is a reduction from the 3.0% that was originally projected for 2010. On the upside, corporate profits are steadily increasing and business capital spending is expected to continue to rise. Commercial investment  activity and interest have increased in the first half of 2010, but the prevailing challenge continues to be a shortage of suitable product." None of this takes away from the fact that commercial real estate, which has long been the bubble within a bubble, continues to subsist purely on the premise of the (ever) greater fool theory, in that ML's research and underwriting desk will be able to find those to sell equity to in an attempt to delever almost a trillion in REIT debt maturing by 2012. Failing that, the firm will merely extend maturities and roll the debt when the time comes: as recent weeks have taught us, there is no shortage of lunatics chasing yield, believing that High Yield is fixed income, when it is really just a high beta equity play on distressed names.

It most certainly would not be a CBRE report if there was not a section focusing on the rosiness of the second coming of the depression. And yes, we henceforth will dub anyone who uses the phrase "[blank] on the sidelines" an incorrigible idiot, as demonstated conclusively earlier this is a validation of the worst form of financial incompetence: not knowing that balance sheets have liabilities in addition to assets. Anyway, back to CBRE's CRE "pros":

  • There is still pent-up equity demand. According to The Institutional Real Estate Letter published by Institutional Real Estate, Inc., there is
    approximately $135 billion of unspent equity “sitting on the sidelines”. This could bode well for sustaining the recent increase in investment
    sales activity.
  • Nine CMBS platforms (and counting) are back on the market. Continuing the trend started in the latter half of 2009, the US CMBS
    market is slowly picking up steam with $2.4 billion in issuances through the first half of 2010, which closely matches the levels seen
    during all of last year.
  • Several large transactions closed in the first half of 2010. Several portfolios, including the $420 million DDRTC Retail Portfolio, as well as
    high-profile transactions such as the $193 million disposition of 600 Lexington Avenue in New York, highlight the overall sales activity. Clearly, there is capital capacity for large transactions, a sharp contrast to a year ago.
  • Credit market conditions, particularly proceeds availability, continue to improve somewhat, helping to catalyze the investment market
    rebound. Recently, life companies and several regional banks have stepped up their lending programs. CBRE has seen a substantial increase in loan originations with both lender profiles, with competition resuming in the way of rates, terms, and proceeds for highly sought after financing. The “middle of the fairway” as to what is acceptable is beginning to expand as well.
  • Leasing trends appear to be turning the corner. Based on the most recent CBRE Econometric Advisors (CBRE-EA) reports, the decline in net
    absorption for both the office and industrial sectors has leveled off. In fact, CBRE-EA forecasts positive net absorption for both sectors by the end of the year. This positive outlook should promote more investor activity in the near term.

The full report can be found here.

h/t Robert

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whatsinaname's picture

URE and its holdings still soaring?

Caviar Emptor's picture

CRE in NY is fully dependent on exceptional bank forbearance on loans, all thanks to ongoing Fed rescue programs. In a word, like everything else in the economy, the sector is insolvent but we're kicking the can every month to wait and see if a miracle happens.

Bankster T Cubed's picture

gangster rule: they don't need no stinkin free markets messing up their joint

tamboo's picture

bankster rule: why have a free market when you can have an arbeit macht frei market?

Froggy's picture

CBRE is the Goldman Sachs of CRE.  All they ever do is talk up their own book/business.  Market rents are at least 25% off the levels at which nearly all currently financed assets were underwritten.  After losing tenants and having leases expire, try explaining to your lender that your shopping center that was financed with $36/ft rents is re-leasing at $28 causing your debt service coverage to drop below 1. 

There is a Trillion scheduled to mature in the next 2 years.  It does not look good from my seat.

Number 156's picture

Greater Fool Theory. n.

see 'Pyramid Scheme'

quintago's picture

10-year at 2.57%; life money at 3.9%; cap rates will surely fall on well leased investments as the spread on leverage has increased. vacancy still frowned upon but there is a lot of stupid money out there. combine that with cheap leverage and cap rates fall. simple.

Sudden Debt's picture

Yesterday evening a wealth tax was introduced in my country Belgium of a extra 4% on savings accounts, earnings on stocks and funds. They call it "wealth tax" but it's not like only the very rich will pay it. Everybody who has money set asside. It was done in the greatest silence and the newspapers don't even mention it!

The poor stay poor and the rich get poorer.

This will lead to a revolt in due time! Mark my words!


Hunch Trader's picture

Can't find any links on this anywhere, would you have some pointers?

The way you write makes it sound like it's 4% from the entire balance of a savings account, whereas only from earnings on stocks and funds. Confiscating 4% yearly from savers would be total rape.



tamboo's picture

joomedia rule: arbeit macht frei press.

Sudden Debt's picture

Tyler, read this man!

The NEW Europe real estate nightmare!

In Amsterdam you are now FORCED to put your second house TO RENT at the MAXIMUM price of 548 EUROto anybody who wants it!! Whater the value may be!

The average price of a house in Amsterdam is 200.000 euro meaning you need to down pay AT LEAST 1000 euro for it a month.

But houses that aren't a outhouse costs between 400K to 1000.000 euro! which you are also OBLIGED to rent to somebody for 548 EURO.

They are letting the housing market CRASH on PURPOSE! Why?!

Why should you buy a second home as a investment if you will only be able to put it out to rent for 548 euro? That at least halfs your investment! What about maintenance costs of the property?

This is PURE Stalinistic Obamaunlogical socialist government! It is now becoming A CRIME TO HAVE MONEY! If you are rich you are a thief!

Other mayor cities ore now looking into it to do something just like it!

original article:,2

translated document:


What's next?! I also have 2 cars, do I need to give it away to somebody who doesn't have a car?!

I have 2 kids, do I have to give one away for adoption to somebody who can't have kids?

I have 2 balls in my nutsack, the first one touching those who isn't blond, has massive tits and a tight ass will D I E a painfull death!





Pegasus Muse's picture

That sucks.  It will spur a mini-boom for lawyers as apartment owners will seek creative solutions (incorporation, "selling" the 2nd apartment to family member, etc) to avoid the criminal social engineering the law mandates.  Maybe that was the idea all along -- a "make work" law to enrich lawyers.

scratch_and_sniff's picture

"Why should you buy a second home as a investment if you will only be able to put it out to rent for 548 euro? "

It's to prevent the property developers/speculators going nuts. They are thinking about doing the same here...hundreds of brand new developments here, yet massive housing waiting lists???  I dont think there is anything in law that says you cant charge more than 548 euro for the rent of your property if you can get it, its just that if the property is not in use, then the authorities will find someone to put into it. Solution; put a family member in it, or at least have their mail directed to it or something, etc etc.

Sudden Debt's picture

Nop, the law actually put a ceiling into the pricing and 548 euro is the maximum you can ask.

And selling the property to family = 21% tax on the sale + notary costs (10%)

And renting to family... I don't really like the rest of my family that much :)

 Welcome to Europe!

spekulatn's picture



Well said, Sudden Debt.

papaswamp's picture

GDP at 2.7%? are they going to be disappointed.

Bankster T Cubed's picture

Extend and Pretend

until total systemic collapse


you're doing a great job bennietimmydimonfuckface

Ura Bonehead's picture

Yes, CBRE is talking their book a bit but, from where I sit, today's real estate market is constipated.  Willing buyers, no willing (or forced) sellers.

We've been looking for value for several years.  But given cap rates like this (confirmed) there's nothing of value out there.  And as long as the 'stupid money' (read: institutional, hedge, Wall Street) is willing to grossly over-pay for deals (i.e., $135 billion of unspent equity “sitting on the sidelines”) then we'll wait for the next bubble and pray the Gov isn't as willing to bailout the players with cash, favorable accounting rules....

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