From a small northwestern observatory…

The quarterly PriceWaterhouse Cooper’s real estate survey is now known as the PWC Real Estate Investor Survey.  However, those of us who have used and trusted it for so many years will always think of it as the Korpacz Survey, named after its founder Peter Korpacz, MAI, and former active member of the Real Estate Counseling Group of America.  The latest issue (4th Quarter, 2012) just hit my desk, and as always, it’s a great snap-shot into the current thinking of real estate investors in the U.S.

The headline pretty much says it all, “Buying beyond core remains tricky.”  The principle problem is the protracted recovery.  Investors are still attracted to core assets for the yield, but are skittish on anything not bought for income.  Particularly favored are community shopping centers with grocery anchors, apartments, offices in tech centers, and port-oriented industrial.

However, a growing number of investors are looking at secondary markets, but expecting returns that are a “multiple of core deals.”  Part of the challenge here is bank underwriting standards, which can really hinge on the finer points of a deal.

Among investment sub-sectors, cap rates have declined across the board this past quarter, with the exception of warehouse (+4) and flex/R&D (+3).  The most notable decline was in the net lease sub-sector (-54 points).  Apartments continue to “lead” with the lowest overall cap rate of 5.8% (down another 18 basis points from the previous survey).

Not withstanding my comments about the the survey’s founder, Susan Smith, the Director of Real Estate Business Advisory Services at PwC, does a great job putting this survey together every quarter.  The quality and quantity of information continues to grow, and its usefulness to real estate decision makers cannot be over-stressed.  For more information, or to subscribe to the survey, visit pwc.com.