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Institutional Investors Beat REITs in US Commercial Property Market

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real estate  United States  USD  Reuters  Bloomberg  REITS  CB Richard Ellis  retail property  CoStar Group Inc  publicly traded real estate investment trusts  Christopher Macke 

Institutional Investors Beat REITs in US Commercial Property Market

By - Thursday 19 May 2011

Institutional investors have overtaken publicly-traded real estate investment trusts (REITs) as the largest buyers of US office buildings in the first three months of the year.

Bloomberg reports that an increase in the number of pension funds, insurance companies and sovereign wealth funds added a net USD 1.39 billion to their office-building holdings in the first quarter, compared with USD 1.1 billion for REITs, according to data from CoStar Group Inc.

"Hopefully that means that they’re down to their core portfolio and they’re going to start adding to it," Christopher Macke, senior real estate strategist at CoStar, said. "Assuming that the institutional folks continue their net buying and the REITs continue that as well, that should portend a positive direction for pricing in commercial real estate."

Demand for the asset class has continued to rise in the past year as worries surrounding the US economy subside and yields remain low for fixed-income investments.

Meanwhile, Reuters recently reported that growing demand for retail property has become the primary driver of the European commercial property market. CB Richard Ellis revealed that first-quarter investment was 32 per cent higher in 2011 than at the same point of last year.

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