Commercial real estate remains one of the better-performing sectors of the stock market, according to a third-quarter update of the economy and markets Thursday by Advantus Capital Management Inc.
The St. Paul investment adviser said that many advisory companies are trying to calm jittery clients about the global financial crisis though admitting the end may not be clearly in sight. Advantus said actions by the Federal Reserve and Treasury Department "very likely prevented a collapse of the financial system," but it questioned whether their actions were "sufficient to contain the crisis in the months ahead."
The relatively bullish view of commercial real estate was based on a 4.5% rise in the Dow Jones Wilshire Real Estate Securities Index through Sept. 30, outperforming the Standard & Poor's 500 Index in this period.
Commercial real estate funding is typically long-term, "insulating it from current stresses in short-term credit," Advantus said. It also provides cash flow and income, which are considered "welcome advantages in this market."
Though the fundamentals of the sector "remain solid at this point," a slowing economy would pressure certain properties such as hotels, where income is not derived from longer-term instruments such as leases, Advantus said.