Thank you for sharing!

Your article was successfully shared with the contacts you provided.

Which Sector Is Getting Hit Hardest?

This week’s Quick Poll shows many people think retail is the industry being hit hardest by the sluggish economy, with 51% respondents selecting that sector. Both office and multifamily were the next popular choices, each garnering 21% of the votes, followed by industrial with 6% of the votes.Jim Kruse, a senior managing director working out of CB Richard Ellis’ Beverly Hills offfice, differs with the poll populous.

Our investment business in the office sector has gotten kicked in the head. There are three groups in the office sector right now: Number one, the group that has put properties on the market and that have not gotten the offers they wanted so they pulled their properties off; number two, are the people who put properties on market at yesterday’s prices, like June of 2007 pricing. And they just have failed to really embrace to today’s pricing, failed to recognize that pricing, and so those properties languish on the market. Third, there’s the segment where transactions are getting done. Where people are finding the cracks in the market and filling in those cracks. They’re looking in West Los Angeles, where there are not a lot of huge blocks of space available, but they find opportunities where they can assemble parcels. Or they’re looking at office buildings that might have a significant rollover.

But all in all, I think the office building business has been hit the hardest. I’m not going to take away from the fact that there has been some retailers that are circling the drain right now. The housing slump, rising fuel prices, soaring food costs—the consumer right now is getting kicked around.

However, if you think about it, over the last five years office buildings have been the investment darling. They’ve performed well; rents have continually climbed to the point where cap rates and return on these buildings was in the 5% level. And now these guys that are selling these buildings still want these 5% cap rates. And that 5% cap rate just is not acceptable anymore. You can’t make money paying a 5% cap rate for that building. In today’s market, you better be looking at a 6.75% to 7% cap rate..

Want to continue reading?
Become a Free ALM Digital Reader.

Once you are an ALM digital member, you’ll receive:

  • Unlimited access to GlobeSt and other free ALM publications
  • Access to 15 years of GlobeSt archives
  • Your choice of GlobeSt digital newsletters and over 70 others from popular sister publications
  • 3 free articles* across the ALM subscription network every 30 days
  • Exclusive discounts on ALM events and publications

*May exclude premium content
Already have an account?

Dig Deeper


Join GlobeSt

Don't miss crucial news and insights you need to make informed commercial real estate decisions. Join GlobeSt.com now!

  • Free unlimited access to GlobeSt.com's trusted and independent team of experts who provide commercial real estate owners, investors, developers, brokers and finance professionals with comprehensive coverage, analysis and best practices necessary to innovate and build business.
  • Exclusive discounts on ALM and GlobeSt events.
  • Access to other award-winning ALM websites including ThinkAdvisor.com and Law.com.

Already have an account? Sign In Now
Join GlobeSt

Copyright © 2020 ALM Media Properties, LLC. All Rights Reserved.