What's In and What's Out?

The good news is five-year and 10 year treasuries below 5.0% are in. Nevertheless, following years of low spreads of 1.0%-2.0% above treasuries for institutional commercial mortgages, low spreads are out. Now, higher spreads of 1.5%-2.5% are in. The same is true for B-rated, non-institutional mortgages, where 2.5%-3.5% spreads are out, and higher 3.0%-4.5% spreads are in. Still, the good news is that despite that low spreads are out, no significant change to commercial mortgage rates came in. Still, many sources of Commercial Mortgage Backed Securities are out, therefore, insurance company and bank mortgages are back in.

Of course, any IPO with a ".com" is in and DVDs are in, while VCRs and CD-ROMs are on the way out. Yep, Amazon.com and Yahoo.com are in, and the local bookstore and Yahoo! the drink are out. Same with cellular phones: they are on the way are out, while digital phones are in. In addition, telephone modems are out, while speedy cable (broadband) modems are finding their way in.

When it comes to power plants, gas power plants are in; nuke plants are out. In addition, gas stations with single-wall storage tanks are out, only those with double-wall tanks are now allowed to remain in. Despite the fewer number of gas stations around, less than a buck-a-gallon gasoline remains in.

Lastly, the excess supply of commercial and industrial real estate is out; and excess demand is in. So to fulfill the demand for more real estate, cranes, bulldozers, backhoes, cement trucks, and dump trucks are back in.

Steve
Stephen Traub, ASA
Publisher, PVM ^SM

The author, Stephen Traub, ASA, is Chief Commercial Appraiser for Property Valuation Advisors, Newburyport, MA. He is a certified general appraiser in NH, ME and MA. He can be reached at 978-462-4347 or:
by e-mail: straub@shore.net