President's Message

garyd sm-2


June, 2018


Mid-Year Update


Dear Client,

How will the turbulent stock market, rising interest rates, and increasing inflation impact Commercial Real Estate?

As of the first quarter reports, all three major property types have seen slightly lower sales volumes in 2017 over 2016; however, they have also seen cap rate compression. Vacancy rates in the Los Angeles metro market are low single digits for both the Industrial and retail sectors; office vacancy increased slightly to 10.7%. Rental rates have been relatively flat for both retail and office and up 4.5% in the industrial sector.

As interest rates rise, buyers are inclined to believe cap rates must come down, but up to now, this has not materialized. The CRE market volume decline may have something to do with this expectation. Equity for commercial real estate is abundant, and a larger segment of the investors are seeking industrial property over the other property types. This high demand is keeping cap rates low and continues to challenge the opportunities to acquire industrial properties.

As always, there are offsetting influences; inflation drives capital to tangible assets, and higher interest rates increase upward pressure on cap rates. Economic indicators along with recent tax breaks have employment levels and consumer confidence at record highs.

My goal is to provide you with the information and the tools you need to enhance your commercial real estate portfolio. Please let me know if I can be of service.


Sincerely,

Gary DiMartino
President

Email: garyd@gdmra.com

GDM Realty Advisors   •   21243 Ventura Blvd., Suite 139   •   Woodland Hills, CA 91364
Tel: 818.340.2030   •   Fax: 818.301.2095   •   BRE #00807510