Have you noticed the tremendous bifurcation in asset valuations between the REITS and the broad commercial real estate market? 

The eye-popping performance of the Green Street's Commercial Property Price Index (GSI), which tracks values of institutional grade assets in major public REITS, shows that the GSI is only 10% off its peak set in August 2007. In contrast, the Moodys/REAL Index (MRI) which is based on actual sales transactions valued at $2.5 million and above, is bouncing along the bottom and at 43% off of its zenith set in October 2007.

The big question is whether the increase in the GSI indicates that you might see a similar pop in the MRI? We note that the MRI has previously outperformed the GSI and with the return of liquidity to a broader range of assets, may do so again.

We’ve said it before: the dislocation in the commercial real estate industry caused by the Great Recession is a buying opportunity. Paying a sensible price for well situated assets will produce outstanding returns over the next five and ten years. 

Real estate investors should take comfort that you are investing in the land of Horatio Alger and Steve Jobs. We will work our way out of our current economic predicament. Never bet against America!

Take care to avoid the typical investor herd mentality. Real estate and stock market investors are famous for piling onto investment themes en masse. Many established real estate funds during the bubble were no more than corks floating on an ocean.