EXPENSES HAMPER PROFITS
In 2005, U.S. hotels reported a 15.5% profit gain, despite the fact that expenses escalated more than twice the rate of inflation. The cost of utilities spiked 13.6%, raising concern among owners.
While condo construction starts have risen steadily over the past seven years and rental construction starts have slowed, the pace of growth may have reached its peak, according to Witten Advisors.
THREAT OF RISING INTEREST RATES DAMPENS REIT RETURNS
The second quarter of 2006 saw the SNL REIT Equity index post negative total returns for most of the quarter, only to rebound in the closing days to remain positive at a meager 0.21%. Rising interest rates coupled with concerns about historically high REIT valuations contributed to the trend.
EUROPEAN OFFICE SECTOR SHOWS LITTLE VOLATILITY
Taken as a whole, the index of Property Portfolio & Research's 21 European office markets provides more stable returns than the 54 office markets that PPR tracks in the U.S. The stability is attributed to lower and less volatile yields. The European office sector is made up of 11 national economic cycles and a wide variety of supply and demand characteristics, lease structures, tax structures, and capital markets.