Commercial real estate scares me - maybe mostly because I do not know enough about it. But, what I observe here locally: New properties that are super hot and fully leased. New properties that look like they are in the 50% leased category, I can't imagine how the owners are making money. And older properties that are in decline and slowly loosing tenants. It seems very fickle. It also seems like the local market is somewhat saturated. I see too many properties with vacancies, that can't be good. And this is an area where the economy seems to be doing well.
Apartments would seem to be a sure thing, especially with house loan requirements being stricter. I remember occupancy rates in Austin in the mid 90's being north of 95% - super tight. Every time we renewed our lease the rate went up, not good for college students. But the local government had put a freeze on building permits for apartments in the 80's because too many people with oil money were building real estate to shelter their profits, even if it meant they lost some money short term. The market was overbuilt, but it caught up and the city was still hesitant to release new permits. But, when they did it was an explosion of growth. It reminds me that these markets are also influenced greatly by the municipalities and the taxing entities. They can change rules on you in a heartbeat and kill what you thought was a sweetheart deal that you are now locked into. So - yes, scary to me.
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