Even as the National Association of Realtors published a new report predicting commercial building vacancies will not peak until 2011, financiers continue to sock away cash from investors in a bid to purchase properties on the cheap.
Last month, The Davis Cos. completed fundraising for a $229 million fund that will invest in real estate transactions in the Northeast. The Davis Cos. currently owns 4.5 million square feet of office buildings in Connecticut, Massachusetts and Florida, and boasts a remarkable occupancy rate of 98 percent.
For its part, Greenwich-based Starwood Property Trust Inc. indicated it is in talks to secure a new finance vehicle to support additional property purchases nationally, after fully investing nearly $1 billion it has raised since last August.
“Commercial real estate as an asset class has re-priced; for the first time in years we are seeing what we believe are solid investment opportunities,” said Jonathan Davis, CEO of The Davis Cos., in a statement. “Investors who see opportunity in challenging times and have the fortitude to act on it, while others are still in ”˜wait and see”™ mode, have historically been rewarded.”
To that end, the company has acquired $200 million in real estate securities at face value in the past 18 months.
At face value, The Davis Cos. vacancy rate itself appears a remarkable figure, given Fairfield County”™s vacancy rate of nearly 19 percent in the first quarter as calculated by Cushman & Wakefield, and 18 percent in the Wilton market where Davis Cos. is heavily invested in its Wilton Corporate Center.
Through 2008, the company was known as Davis Marcus Partners, but that year split into two separate entities after the founding partners when their own ways, while retaining joint ownership of existing buildings in the portfolio.
The companies continue working together on new deals ”“ in Waltham, Mass., Verizon Communications Inc. recently broke ground on a new high-tech research lab at a complex owned by The Davis Cos. and Marcus Partners, along with Prudential Real Estate Investors.
Besides 200 Connecticut Ave. in Norwalk where The Davis Cos. and Marcus Partners have their local offices, the companies”™ holdings in Fairfield County total more than 1.4 million square feet at Wilton Corporate Center in Wilton and additional buildings in Shelton and Trumbull.
The Davis Cos. also has ownership interests in 2150 Post Road in Fairfield and Reservoir Corporate Center in Shelton. Storage computer giant EMC Corp. recently signed a lease for the 8,500-square-foot penthouse at 2150 Post Road, relocating from the MerrittView building in Norwalk, and bond underwriter Herbert J. Sims & Co. Inc. took a lease for nearly 9,500 square feet of space.
In its quarterly report on the U.S. commercial real estate market, Prudential indicated that there is movement on several levels, with capital flowing back into the sector and what it sees as a stop in the decline of property values.
With many investors like The Davis Cos. perceiving that values have hit bottom, expect property sales to pick up ”“ though some caution to expect additional bumps in the recovery.
“The office, warehouse and retail sectors continue to experience the delayed effects of the recession,” said Lawrence Yun, chief economist of the National Association of Realtors, in a statement. “These sectors should see gradual improvement after jobs pick up and create additional demand for space, meaning a broader improvement in commercial real estate is likely in 2011.”
