Corrects quote in last paragraph to read "I can't think of any market in the world that isn't priced to perfection, as it were," instead of "No real estate market in the world is priced to perfection."
By William Kemble-Diaz
NEW YORK (Reuters) - Rising office rents in many European and U.S. cities will compensate for a likely rise in commercial property yields due to higher interest rates, leading U.S. real-estate fund managers said on Monday.
"We aren't anticipating any further cap rate compression, but vastly improved fundamentals in the majority of markets that we're in will offset increased borrowing costs," Robert Speyer, senior managing director at Tishman Speyer, said at the Reuters Real Estate Summit in New York.
Cap rates are a measure of the operating income on a building -- or its rent after expenses -- in proportion to its capital value. They are also known as property yields and move in the opposite direction to property prices, much like yields on a bond.
Average cap rates on U.S. central business districts fell to 6.5 percent in May 2006 from 8.5 percent in 2003, according to Real Capital Analytics. The CB Richard Ellis European Weighted Average Prime Yield has fallen by just over 100 basis points to 5.15 percent in the three years to March.
Speyer said office rents were set to increase at a faster pace than the cost of borrowing in New York, London, Paris and Milan.
Tishman Speyer owns New York landmarks such as the Chrysler Building and Rockefeller Center. Office holdings in Europe include The Atrium in Amsterdam, the Paris Bourse and the Millbank Center in London.
Also staying positive despite a more challenging environment was Apollo Real Estate Advisors L.P., which is positioned at the riskier opportunity fund-end of the market, historically targeting an annual investment return of more than 20 percent. Continued...
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| Paper | Aug 20 - 21, 2008 | Manufacturing |
| Japan Investment | Jul 01 - 2, 2008 | Country Summits |
| Global Real Estate | Jun 23 - 25, 2008 | Real Estate |
| Consumer and Retail | Jun 16 - 18, 2008 | Consumer Retail |
| Investment Outlook | Jun 09 - 12, 2008 | Financial Services / Exchanges |
