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We’re bullish on office property – here’s why and how you can take advantage

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We’re bullish on office property – here’s why and how you can take advantage

By: Chris Sadler, President of Allegiancy

October 20, 2014

As a leader of a real estate asset management firm, I am bullish on office property as an investment today. Why? Because the fundamentals are outstanding:

• Values on average are well below replacement costs.
• Not much new construction has occurred.
• Interest rates are still low.
• Sentiment is not yet widely bullish.

I believe it’s a good time to buy, but not necessarily to sell. (The best time to sell of course is heavily depends on when you entered the market.) I don’t believe the market is at the top. But trying to find the top or bottom of a market, while possible, has not proved to be an effective strategy, from what I’ve seen in my decades in this business.

In his column, Jared Dillian recently wrote about finding the bottom of the market, opining that it’s possible. He is writing about the stock market, where trades are less sticky than real estate. However, in both stock and real estate, the bottom or top of the market may well be visible. But as an investor, you are at the mercy of the current state of emotion when you act on it. That’s because when the inflection point occurs, you may not have the capital to act, or you could be panicking.

My conclusions:

1) Finding the absolute top or the absolute bottom of a market is not worth missing a good buy or sell. A disciplined approach within the vicinity of the inflection point is more valuable.

2) The important overall concepts are to have a plan, and to avoid the heightened emotion (either fear or greed) that can destroy your ability to execute on your plan.

Discipline and a dispassionate approach are the keys to investment success in commercial real estate. And remember, you need to plan for the effective, efficient management and operation of your property during the time you own it. That too can be key to maximizing your profits.

You may also be interested in:

Allegiancy’s Philosophy

Allegiancy’s Performance

 

 

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