Experts Say Real Estate’s Easy Money Has Been Made

When bartenders and the shoe shine guy are making money hand over fist in real estate, that's usually when I know the easy money has been made (and the bubble is about to burst). For financial types though, cap rate and rent P/E are other ways...

Rents and tenancy will once again take their rightful place in the acquisition process, and cap rates will factor less in coming months. That’s the word coming from a Monday morning press briefing by the researchers of Boston-based Torto Wheaton Research, conducted in the Manhattan offices of parent firm CB Richard Ellis.

As Craig Thomas, SVP and director of research for Torto Wheaton, explained during the presentation, 11% average total returns for the past three years were nice, but “4.9% of that came from cap-rate contributions.” Now those contributions are about to go away, and “in 2006, those levels of return are going to have to come from somewhere else. The period we have enjoyed is ending