Occupancy Rate Becoming Less of a Concern for Downtown’s Real Estate Investors
I was recently informed by local economist and manager of IDEAeconomics, a website that promotes post-Keynesian views (and post-Keynesian must not be confused with neo-Keynesians), Alan Harvey that a significant shift has occurred in the market for commercial property in Seattle’s downtown area.
In the past, the value of a commercial property was “the capitalized value of the stream of rents from that property.” In this order of things, occupancy rates (content) mattered. Now, commercial properties are not selling content and value but merely value. Meaning, they are selling a “projected increase in price.” Meaning, downtown Seattle has entered the phase of Ponzi financing.
“My speculation is that this has been caused by people looking to move their money into the US,” Harvey explained. Where did he get this information? From a source within the CBRE Group, a “commercial real estate company based in Los Angeles.” This source confirmed that global surplus capital is behind this transition. “It’s much more lucrative to build or buy with the hope of selling at an inflated value rather than actual revenue.”
This post was published at Zero Hedge on 03/20/2016.