Wednesday, February 07, 2007

Commercial Real Estate is HOT

The Vanguard REIT (real estate) Index Fund has gone up by 36.32% over the last year (vs. 14.5% for the S&P 500), and almost 11% just so far this year (vs. 2.2% for the S&P 500). Intererst rates are low and stable, construction has slowed, vacancy rates are the lowest since 2001 and falling, commerical rents are rising (5.2% increase expected in 2007), which all makes commercial real estate one of the hottest markets right now.

Equity Office Properties (EOP) holds the nation's largest portfolio of office properties (500 buildings), and is the subject of a heated bidding war between the Blackstone Group and Vornado Realty Trust in a deal valued at more than $38 billion. EOP's share price has almost doubled over the last year from $30 to almost $60.

Bottom Line: A $10,000 investment 10 years ago would have grown to $20,000 today invested in the S&P 500 Index, and to almost $40,000 invested in the Vanguard REIT Index Fund. The residential real estate market might be soft, but the commercial real estate market is HOT! (Note: You can invest in the Vanguard REIT Index fund with a minimum of $3000).


At 2/07/2007 2:32 PM, Anonymous Dan Q said...

Past performance is no guarantee of future success. The ten year performance for tech stocks was pretty impressive in 2000, although that certainly didn't mean that they were a good investment. I would be a little leary on investing in REITs at this point in time

At 2/07/2007 5:57 PM, Blogger Niall said...

You can invest in the Vanguard REIT with much less than $3000. Look at the ETF: VNQ, which follows the Vanguard REIT and has lower fees.


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