Real Estate Research Corporation’s (RERC’s) investment conditions ratings for the institutional apartment and central business district (CBD) office sectors each jumped a full point during second quarter 2010, making them the two highest-rated property types that RERC surveys.
The findings are included in the RERC’s new summer report, Riding the Edge of Success.
The investment conditions ratings are based on a scale of 1 to 10, with 10 being higher and most favorable.
For the apartment sector the rating increased to 7.1 during second quarter 2010 from 6.1 during the first quarter. The investment conditions rating for the CBD office sector increased to 6.0 during the second quarter, up from 5.0 for the first quarter.
“These high ratings reflect the increased investment prospects we are seeing for commercial real estate in general,” said Ken Riggs, RERC president and CEO. “Institutional investors skittish about the slowing economy and the volatility and risk exhibited in the stock market are finding the diversification, stability, and higher absolute returns of the commercial real estate asset class increasingly attractive.”
Although the apartment sector, long-recognized as the commercial property type that generally possesses better risk-versus-return characteristics, has often presented an investment conditions rating higher than those for other property types RERC rates, it has not had a rating this high since second quarter 2001, when the rating was 7.4 on the same scale.
Basically, that means that apartment investments are proving to be safer bets during slowed economic times and are meeting the strategic initiatives of most investors.
“I wouldn’t say the apartment sector is ‘recession-proof,’ but it is the sector that is regarded as ‘most safe’ and also seems to garner the most demand when times are tough, whether it is in this recession or the last one,” said Riggs.