Commercial property up 144 percent

The massive billion dollar hotel acquisitions in the United States have grabbed my attention.

Recently in the news, Anbang Insurance, based in China, challenged Marriott with an initial non-binding offer of $12.8 billion on March 14, raising it later to $13.16 billion to acquire Starwood and Marriott Hotel Chains.

If Anbang’s deal is completed and approved by the federal government they would be holding the country’s most powerful and largest hotel chain.

There are big commercial property deals every now and then, but recently the amount in which foreign companies has got me thinking. Why would any company buy this amount of property in a period of time in which commercial property prices are up 144 percent since 2009?

Morgan Stanley Research put a chart on their newsletter to the media. If you look at the chart, you can see prices are up more since 2009 than the period of time leading up to the housing bubble in 2008.

According to Bloomberg, one of the most trusted financial news sources, Blackstone is the largest private equity property investor, with about $94 billion under management in real estate.

John Gray, the head of Blackstone Real Estate, told viewers and attendees at the July 2015 Delivering Alpha Conference that he feel prices have more room to grow because there is evidence of large inflows of capital from Asia and Europe into U.S. commercial real estate deals.

He also points out that currently there isn’t as much leverage today as there was back before the housing bubble occurred.

Only time will tell, as with anything.

I, on the otherhand, always question and look into anything. In my view, this rise of 144 percent is only sustainable if there’s real fundamental growth and continuing bids from high networth in Asia and Europe.  Any sign of slowing down, which we’re currently seeing in China and Europe, will signal more risk to the downside than upside.

Would you purchase anything after its gone up 144 percent?


Leave a Reply