The temperature has been in the 100s for weeks. With fewer cars on the road, my drive to work is taking half the time it usually takes. Leasing activity in the market remains steady, but has slowed considerably from earlier in the year.
Although leasing activity has slowed, investment sales activity has not. There seems to be more projects trading this year then the last three years combined. A lot of this activity is driven by the renewed belief that the real estate markets are in recovery.
For the first time in my real estate career, Texas is a favored market for institutional investors. Texas has always been looked at with fear because of the vast amount of available land for development, as well as the number of quality developers based here.
The leasing activity early in the year—and the shrinking returns available in multifamily—has brought some buyers back to office buildings. The flow of investment dollars into multifamily will continue to reduce margins and cause the investors to look to other types of assets that provide greater returns.
The greatest driver is the aggressive debt quotes being provided by banks and life insurance companies. With the low cost of debt and the increased leverage, there should be plenty of qualified buyers for any project that is properly priced.
So, as we see the end of the long hot summer, get ready to go back to the longer drive into work. Dust off those sweaters and look to an active office market through year-end. As the temperatures cool down I see sales and leasing heating up throughout the remainder of 2012.
William R. “Bill” Cawley is chairman and CEO of Cawley Partners. Contact him at email@example.com.