Mar 19 2013
The U.S. housing market saw a strong recovery in 2012, driven by record low mortgage rates and huge pent-up demand. The trend has continued in 2013. While the commercial real estate market also showed signs of improvement in 2012, the recovery was not as strong as the one seen in residential market.
However, 2013 could be different as outlook for commercial real estate has improved significantly thanks to a robust recovery in the U.S. economy. This augurs well for real estate developers such as American Realty Capital Properties Inc. and Brookfield Asset Management Inc. (NYSE: BAM).
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The residential real estate market has seen a strong recovery since last year, thanks mainly to actions from the Federal Reserve. The Fed announced an aggressive bond buying program in September last year, which has helped in bringing down mortgage rates to record low levels.
The commercial real estate market also saw a recovery in 2012, however, it was uneven. This was mainly due to concerns over the fiscal cliff. However, the fiscal cliff has been averted after lawmakers signed a last-minute deal at the start of this year. This has ended a great deal of economic uncertainty and is likely to benefit the commercial real estate market. In addition, there has been a significant improvement in the U.S. economy. Data released last week once again highlighted the fact that the U.S. economy is seeing a strong recovery.
All these developments are benefiting the commercial real estate market. Already there has been an increase in rent and occupancy rates this year, and the trend is expected to continue as the economy continues to improve.
With the commercial real estate market improving, American Realty Capital Properties Inc. last week announced that it acquired a FedEx Ground distribution facility leased to a subsidiary of FedEx Corporation. The facility is located in Lowell, Arkansas. In addition, American Realty Capital Properties also announced that it has a robust pipeline of acquisitions under contract, totaling around $167.2 million.
Nicholas S. Schorsch, Chairman and CEO of American Realty Capital Properties, last week said that the company continues to add credit tenants to its portfolio and has assembled an attractive second quarter 2013 pipeline. Schorsch added that the company's acquisitions team continues to find favorable buying opportunities in the net lease space.
Conversely, Brookfield Asset Management Inc. reported strong financial results for 2012 last month. Bruce Flatt, CEO of Brookfield Asset Management, said last month that the company achieved significant growth in funds from operations in 2012, reflecting strong performance from most of its operations. Flatt further said that the company is well positioned to continue to deliver solid results, as it raises and deploys further capital for clients.
For 2012, Brookfield Asset Management Inc. reported net income of $1.4 billion, or $1.97 per share. Funds from operations for 2012 rose 12% to $1.4 billion.