Commercial Real Estate Market Still Strong

Market for commercial real estate slows, but outlook still positive

Homeowners who foreclosed or would-be home buyers who can no longer get financing are seeking to rent, a positive development for the apartment sector in the commercial property market.

Fundamentals in the commercial market remain strong with rising rents and occupancy levels expected to continue, especially in metropolitan areas. And while overbuilding in residential housing is worsening the magnitude of the downturn, commercial markets are not in oversupply mode.

"There's plenty of excess capital that wants into real estate, especially in metro areas," Fasulo said, adding that apartment building operator Archstone-Smith Trust's $22.2 billion acquisition by a partnership led by Tishman Speyer earlier this month provided a "real shot of adrenaline to the marketplace."

Tishman Speyer, which owns New York's Rockefeller Center and Chrysler building, led the takeover with capital organized by Lehman Brothers Holdings Inc., Banc of America Strategic Ventures Inc. and Barclays Capital.

As the housing market struggles to regain its footing, the outlook for commercial real estate is mostly positive, and investors are reaping the benefits.

A recent example: Host Hotels & Resorts Inc., the nation's largest lodging real estate investment trust, this month reported third-quarter results that beat Wall Street estimates on improved occupancy and lodging rates.

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