One of the Bright Spots of U.S. Economy
China’s economy is undoubtedly in turmoil. The Shanghai Composite -- which fell more than 8% on Monday – is now down 26% since August 17, trigging global sell-offs, as investors fear the China will not meet its 2015 GDP growth targets. The S&P 500 is down 10% over the same time.
Despite the global uncertainty and potential contagion, one of the hot spots of the global economy remains commercial real estate. As addressed by real estate brokerage, Marcus & Millichap, “commercial real estate remains well-positioned to withstand short-term shocks due to sturdy demand drivers and limited supply risks.”
Vacancies, as the firm points out, have tightened in all major property types. Rent growth also remains healthy. “Investor activity has risen, and commercial real estate transactions could potentially surpass the record levels of 2006.”
There’s still no denying real estate should be a part of every portfolio. In 2014, real estate investments averaged annual returns of 15% -- a sharp contrast to the 5% return in stocks and 6% return for bonds.
I’m not concerned about constant talk of bubble fears, and Federal Reserve interest rate hikes either. The Fed has painted itself into a corner that it can’t get out of. Janet Yellen is very likely to push any chance of a small hike well into 2016.