After reaching record-high prices, California commercial real estate property could fall in value over the next year if analysts’ predictions are correct. On June 20, Pacific Investment Management Co. issued a report about the impending ‘storm” that it sees coming in the U.S. real estate market. The company predicts that commercial real estate prices could decrease by 5 percent over the next 12 months.
According to the Pimco report, the past six years of price growth in the commercial real estate market has been partially caused by demand for U.S. property by global buyers. The upward trend in real estate prices could be halted by a slow-down in China’s economic growth as well as lower oil prices. Dislocated debt markets have also been blamed for the predicted downturn in the real estate market.
Falling real estate prices could create some opportunities for investors looking to purchase new properties. Investors may also be able to capitalize on the maturing debt market by funding borrowers. There has already been some evidence of a decline in commercial real estate prices in major cities, the same areas that recently experienced the highest increases in value. According to a June 6 report, commercial property values for properties in major U.S. cities have gone down by 3 percent over the last three months.
While reports about the U.S. commercial real estate market as a whole are valuable, investors may want to talk to an attorney about the specific real estate market that they are investing in. An attorney may be able to provide insight on real estate trends that are specific to Los Angeles. When an investor is considering a real estate purchase, an attorney may be able to determine if there are any title disputes or zoning issues attached to the property.