Commercial Real Estate News 

                                                    Commercial Real Estate Appraisers / Consultants                             Warren K. Hoppke, SRPA
                                                                                                                                                         Robert Nord, MAI
                                                 Southern California Appraisal Services for Over 30 Years

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 Commercial Real Estate and Capitalization Rates

In the appraisal of commercial real estate many investors ask the question, " What’s in a capitalization rate "

A cap rate consists of the expected rate of inflation, plus the real rate of return (10yr. Treasury bond is considered the risk free basic rate) plus a risk premium minus the NOI growth rate.

The spread between real estate cap rates (NCREIF Cap Rate) and the 10-year Treasury has generally varied between 100 and 450 basis points since 1992. The risk premium spread for investment grade properties in 2004-05 have ranged from 3.5% to 4.5%, but are expected to slowly decline in the near future as large amounts of capital compete for a limited supply of investment grade properties. NOI growth rates are expected to increase from 1.0% to 2.0% on average. Poor performance on alternative investments (primarily the stock market) is one of the reasons cited for declining risk premiums as massive amounts capital flow into commercial real estate. Moreover, South American and European investors are also flocking to U.S. commercial real estate because of the low real rates of return in their own countries. In addition, the prospects for a weakening dollar over the next several years has introduced another element in european investors yield expectations. Some european investors have introduced currency expectations into their spread sheets and have out bid american investors on several investment grade properties.

According to Korpacz commercial Real Estate Investor Survey, national unleveraged cap rates on apartments ranged from 5.0% to 9.25% and averaged 7.01% for the 4th quarter of 2004 and were down slightly from the 3rd quarter. Commercial real estate as follows; Shopping center cap rates were about the same 5.5% to 9.5% with an average of 7.4%. Office and industrial warehouse cap rates were higher averaging 8.4% and 8.12% respectively. This is to be expected, especially in many national office markets where vacancy rates are just now slowly starting to decline. Cap rates for apartments should trend toward 7% or lower and remain constant for the next serveral years, notwithstanding any anomalies in interest rates and assuming rental rates continued to increase.

Appraisal & Lease Analysis California Commercial Real Estate

Analyzing commercial real estate leases takes time and expertise. Purchasing California commercial real property without analyzing each lease can have a profound impact on your properties bottom line (net income) and market value. In the linked article on Triple Net Leases , the author explains common mistakes investors, owners, real estate brokers and agents make when buying or selling a commercial property. Determining if the lease is a true triple net lease, bond lease, modified net lease, gross lease, modified gross lease, net net lease, net lease or other hybrid type of lease is the job of a Certified General Appraiser licensed with the Office of Real Estate Appraisers (OREA) in the State of California.  

Additionally, a Certified General Real Estate Appraiser will look at the escalation clause in each lease and the method used to determine rental increases over the term of the lease. In the article Leasing Lessons the aurthor analyzes several different methods used in determining rental increases as it relates to commercial real estate and how to maximize return on investment. 

Moreover, each clause in every commercial lease must be carefully reviewed to determine the potential affect it could have on a properties potential market value. The one person we believe that is best suited to review commercial real estate leases is a professional  Certified General Real Estate Appraiser.  

Our focus is on commercial, industrial, apartment buildings, residential vacant land, single family residences, ranch & ocean front property, luxury estate homes, mansions,  acreage with entitlements, restaurants, shopping center, fast food restaurant, office building, R & D industrial, automotive centers, gas stations, church, medical building, storage facilities, motel and hotel, subdivsions and proposed construction, and special use properties.   

Our appraisers have a wide range of experience in numerous geographical areas throughout the state. The types of real estate appraisals we can provide include:

California Commercial Real Estate Appraisers

IRS 706 & 709 Valuations
Mark to  Market
Mortgage Loan, Sale, Purchase Transactions
Estate Tax & Trust
Insurance Claims - Fire & Flood Damage, Landslide, Geologicial Issues
Expert Witness Testimony & Litigation Support
Real Estate Damages | Diminution in Value

South County Real Estate Appraisers Commercial

Gas station appraisers, church appraiser, residential appraisers, california appraisal, california estate, commercial appraisal california, commercial expert witness real estate, los angeles, california commercial real estate, appraiser commercial, real property, Los Angeles estate, apartment appraiser, commercial restaurant appraiser, industrial appraiser, industrial real estate

Office of Real Estate Appraisers - State Certified Commercial Appraiser  

 

 

 

 





     

 







VALUATION REVIEW:
 
Metro-West hires new VP of Operations
3/18/2010 10:13 AM
The appraisal services firm Metro-West Appraisals announced the promotion of a new vice president of operations, in line with the continued expansion the company has experienced over recent years. Find out the identity of the new executive here...Read More
 
Report suggests there are 1 million properties in REO or foreclosure
3/18/2010 10:12 AM
The latest Mortgage Monitor report from Lender Processing Services estimates that there are one million properties in REO status across the country. Other results show that while the pace of delinquencies is slowing, rates are still at an all-time high with nearly 7.5 million loans in some stage of delinquency...Read More
 
Unlicensed appraiser involved in mortgage fraud scheme
3/18/2010 10:10 AM
An unlicensed appraiser was involved in a mortgage fraud scheme in Pennsylvania in which he submitted numerous fraudulent appraisals to loan officers, one of whom has now been charged. Read on for more...Read More
 
Builder confidence sinks with weight of foreclosures
3/18/2010 9:19 AM
Builder confidence in the market for newly built, single-family homes fell back two points to 15 in March as poor weather conditions and distressed property sales posed increasing challenges to both builders and buyers, according to the latest National Association of Home Builders/Wells Fargo Housing Market Index...Read More
 
AIMSdashboard releases update of management system
3/16/2010 11:24 AM
The appraisal management technology provider AIMSdashboard has released the latest version of its appraisal independence management system, now updated to comply with all the latest regulatory requirements. Read on for more information...Read More
 
FHA changes validity periods for REO appraisals
3/16/2010 11:21 AM
A mortgagee letter from the Federal Housing Administration changes the validity periods for appraisals for the listing price on the Department of Housing and Urban Development’s REO properties. Find out the change here...Read More
 
February marks 50th consecutive month of foreclosure increases
3/16/2010 11:19 AM
RealtyTrac released its February 2010 U.S. Foreclosure Market Report, which shows foreclosure filings — default notices, scheduled auctions and bank repossessions — were reported on 308,524 U.S. properties during the month, a decrease of 2 percent from the previous month but still 6 percent above the level reported in February 2009...Read More
 
TAVMA survey: AMC appraisers have 15 years of experience on average
3/16/2010 11:16 AM
A survey from the Title/Appraisal Vendor Management Association (TAVMA) reveals that on average, appraisers working with appraisal management companies have more than 15 years of experience on the job. At the same time, the executive director of TAVMA explains the thinking behind appraisal fees. Find out more here...Read More
 
Utah-based AMC rebrands itself
3/11/2010 10:48 AM
A Utah-based appraisal management company has consolidated all its management, technology and compliance services under one name. Find out which company has repositioned itself here...Read More
 
Freddie Mac is using AVM for review appraisals
3/11/2010 10:47 AM
The mortgage giant Freddie Mac is using its automated valuation model to help lenders review appraisals, but it is not intended to replace appraisals. Find out more here...Read More




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