Being Single Attracts Commercial Property Investors

Posted on October 14, 2011

Investors fretting about commercial real estate in a weak economy are taking cover in stable properties leased by a single tenant.

Since the fourth quarter of 2010, single-tenant properties have averaged more than 10,000 transactions per quarter — the highest quarterly totals on record, according to a new report by CoStar Group. So far this year, there have been more than 30,000 single-tenant sales valued at $29.2 billion in all property types.

Investors, particularly foreign buyers, are focused on fully leased core properties. The emergence of single-tenant properties come as investors continue to worry the recovery in commercial real estate will be sidetracked by global malaise and mounting concerns that the availability and cost of capital will increase for real estate borrowers as a result.

The increasing demand for these investment types isn’t necessarily coming by choice, Brian Merzlock, valuation manager at Williams, Williams & McKissick auction house in Tulsa, Okla. is quoted as saying in the CoStar report.

“This is a market-forced move,” he said. “When you are disheartened by the world markets time and time again, you become more restrictive with your capital, and the retail lease market becomes a more appealing to risk appetite.”

By A.D. Pruitt, Wall Street Journal