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The Australian: U.S. REITs Follow Message on Lack of Growth

According to The Australian:

Cracks are beginning to appear in commercial property markets with prices peaking and values in the US likely to fall a modest ­3 to 5 per cent during the year, according to Jim Sullivan, managing director of US real estate research firm Green Street ­Advisors.

“Its not head for the hills, its not 2007 all over again,” said Mr ­Sullivan, who was in Sydney ­recently.

The conditions for a commercial property bubble did not exist this time, he said.  “We do not have the rampant and excessive debt-fuelled speculation we had in 2007 that encouraged buyers to pay outlandish prices for real estate.”

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“Most of the REITs have traded at discounts to net asset value. It’s an environment where the market is telling you, ‘I don’t want you to grow’ and the REITs have headed that signal.

The public markets had a good track record of predicting the direction of private market prices, Mr Sullivan said.

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Low oil prices were having an impact in a number of ways, Mr Sullivan said. While there was more money in people’s pockets, low oil prices had hit markets like Houston’s office sector and put a question mark over the investment appetite of the oil producing country’s sovereign wealth funds.

Mr Sullivan expects the outflow of funds from Australia to continue due to the high concentration of ownership limiting investment opportunities.

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To view the full article from The Australian, click here.