As Residential Real Estate Slows, Commercial Grows

Residential real estate may be reeling, but commercial property sales are doing just fine. According to Cushman & Wakefield President and CEO Bruce Mosler, “Commercial real estate is doing nothing but appreciating.” He talked with Erin Burnett on “Street Signs” about what to expect in 2007.

Residential and commercial real estate are polar opposites these days as far as Mosler is concerned. The commercial properties market is undersupplied, fundamentals are strong, and rents are rising. He says class-A product buildings in New York are getting $100 per square foot in rent, and he sees the potential for another 10% to 15% in appreciation.

Another thing Mosler says is different in the commercial market is the potential for speculative building. He cites “lender discipline” as the main reason the sector has avoided bubble-like growth, and even though stable fundamentals and strong market could necessitate new construction, he’s hoping developers – and banks – will stay cautious.

Elsewhere in the world, rents are even higher than in New York – especially in Tokyo, London and Paris. But the $35 billion put into Big Apple commercial real estate made it the most invested-in market in 2006. “So look for New York rents to continue to drive up,” Mosler says.