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Insights from Colliers In Focus Live: Pricing

Author: Aaron Jodka

By Aaron Jodka  | FEBRUARY 2020

At the Colliers In Focus Live “Main Stage” event held at Big Night Live, Managing Director Frank Petz built on the development cycle and land value discussion, delving into pricing in the market for existing assets.

Frank supply_1000pxPetz prefers to use the term “stabilized returns,” or “stabilized yields” instead of cap rates, because he believes that highlights the value that can be found in the market today. Approximate stabilized returns for urban multifamily and Class A office are in the 4%–4.5% range, while suburban office and life science and urban Class B properties are at or north of 6%. Industrial falls in between at 5.5%. Just two years ago, industrial was at 7%.

With that backdrop, he dug into the reasons for current pricing. Rents are rising for lab, office, and industrial, as noted by previous Colliers speakers Evan Gallagher, Chris Cuddy, and PJ Foster. That drives value. Today’s interest rates mean that there is support for these stabilized return levels, Petz noted. At the previous peak, stabilized returns were at 140 basis points higher than the 10-year Treasury rate. Today that spread is 300 basis points. Real estate provides a good risk-adjusted return.

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