Commercial real estate performance generally lags economic growth by about four to six quarters. As our firm, ING Clarion Partners, suggested earlier this year, 2010 appears to be a transition year, moving from the steep downturn of 2009 toward a sustainable recovery in 2011.
Structural constraints on the delivery of new supply in a given market reduce an owner’s competition for tenants, which may lead to higher occupancy, higher rent levels, stronger rent growth and higher capital values over time.
The cap rate spread over the 10-year Treasury yield is normally positive, reflecting the additional risks inherent in real estate assets. The risk premium is generally considered necessary to compensate for liquidity, leasing and tenant credit risk.