Sidelined Investors May Return — When the Yield Does

Real estate investors are spending less in New York City to acquire properties. However, institutions like CalPERS still have a desire to buy, but today’s prices are simply too high to meet their yield requirements.

“They can’t get that return on investment. I’m sure they would be here all day if they could get the rates of return that they need,” said James Costello, senior vice president with top data firm Real Capital Analytics. Having pension funds like CalPERS on the sidelines may lessen the pile-up of investors bidding for properties.

However, sidelined investors like these could jump back into the market if investment yields rise again. “They still want to be in there,” said Costello. “If they could get a 7% cap rate, they would do that all day.”

“London and New York are still the safe harbor for investors, and I don’t think that’s going to change,” said Chris Ludeman, global president of capital markets for CBRE at “Econ Versus The Street,” in a one-on-one conversation with Costello at Connect New York, held Tuesday, September 19, 2017 at The Underground, Rockefeller Center.

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