and the second-tier sites, especially those located in what used to be second-tier nations, has narrowed everywhere.

Commercial property is a hybrid asset. It offers high yield, giving it bond-like characteristics. And moreover like shares and unlike bonds, investors can expect that yield to grow, at least in line with inflation. Enthusiasm for the sector waned in the 1980’s and 1990’s because of fat Stock Market returns. In this day and age, however, pension funds are desperate to diversi

Last year’s acquisition by the Blackstone Group of Equity Office Property Trust for USD 36 billion was the largest buy-out ever of an owner of office buildings. More importantly, it signaled that the commercial property market is healthy, now more than ever, and that is not afflicted by the same ailments so characteristic of the residential markets, much less by bubbles of any color, shape or form.

Albeit the biggest deal ever, Blackstone’s move was one of the many transactions leading to the privatization of the commercial property markets, a trend that since then has seen some USD 100 billion change hands and disappear from public ownership both in the United States and Canada. Today’s property barons can borrow against the value of the assets and use the cash-flow from rental income to meet the interest payments. With property values rising fast, they can afford to strike any deal they want.

This Monopoly-like craze is not confined to America. Just as bonds, stocks and shares are freely traded across borders, so is ownership of commercial property assets. Monopoly goes global!

The Bank of Canada reports, for example, that cross-border commercial and office property investment worldwide hit USD 290 billion in the first half of 2006 – a 30 percent increase over the same period in 2005. In the process, once obscure markets have been swept into the mainstream. Take the Euro Zone, for instance. Practically all new entrants into the European Union have benefited from the convergence of Western investors looking to snatch up buildings at rock-bottom prices. Bulgaria is the latest example of this trend.

Commercial real estate is all part of the same ‘search for yield’ trend that has seen investors hunting around the globe for other high-income assets. It is all part of globalization and governments – especially Western governments – see it in a positive light. Because of this the gap between yields on the highest-quality properties and the second-tier sites, especially those located in what used to be second-tier nations, has narrowed everywhere.

Commercial property is a hybrid asset. It offers high yield, giving it bond-like characteristics. And moreover like shares and unlike bonds, investors can expect that yield to grow, at least in line with inflation. Enthusiasm for the sector waned in the 1980’s and 1990’s because of fat Stock Market returns. In this day and age, however, pension funds are desperate to diversif

tions leading to the privatization of the commercial property markets, a trend that since then has seen some USD 100 billion change hands and disappear from public ownership both in the United States and Canada. Today’s property barons can borrow against the value of the assets and use the cash-flow from rental income to meet the interest payments. With property values rising fast, they can afford to strike any deal they want.

This Monopoly-like craze is not confined to America. Just as bonds, stocks and shares are freely traded across borders, so is ownership of commercial property assets. Monopoly goes global!

The Bank of Canada reports, for example, that cross-border commercial and office property investment worldwide hit USD 290 billion in the first half of 2006 – a 30 percent increase over the same period in 2005. In the process, once obscure markets have been swept into the mainstream. Take the Euro Zone, for instance. Practically all new entrants into the European Union have benefited from the convergence of Western investors looking to snatch up buildings at rock-bottom prices. Bulgaria is the latest example of this trend.

Commercial real estate is all part of the same ‘search for yield’ trend that has seen investors hunting around the globe for other high-income assets. It is all part of globalization and governments – especially Western governments – see it in a positive light. Because of this the gap between yields on the highest-quality properties and the second-tier sites, especially those located in what used to be second-tier nations, has narrowed everywhere.

Commercial property is a hybrid asset. It offers high yield, giving it bond-like characteristics. And moreover like shares and unlike bonds, investors can expect that yield to grow, at least in line with inflation. Enthusiasm for the sector waned in the 1980’s and 1990’s because of fat Stock Market returns. In this day and age, however, pension funds are desperate to diversi

ds, stocks and shares are freely traded across borders, so is ownership of commercial property assets. Monopoly goes global!

The Bank of Canada reports, for example, that cross-border commercial and office property investment worldwide hit USD 290 billion in the first half of 2006 – a 30 percent increase over the same period in 2005. In the process, once obscure markets have been swept into the mainstream. Take the Euro Zone, for instance. Practically all new entrants into the European Union have benefited from the convergence of Western investors looking to snatch up buildings at rock-bottom prices. Bulgaria is the latest example of this trend.

Commercial real estate is all part of the same ‘search for yield’ trend that has seen investors hunting around the globe for other high-income assets. It is all part of globalization and governments – especially Western governments – see it in a positive light. Because of this the gap between yields on the highest-quality properties and the second-tier sites, especially those located in what used to be second-tier nations, has narrowed everywhere.

Commercial property is a hybrid asset. It offers high yield, giving it bond-like characteristics. And moreover like shares and unlike bonds, investors can expect that yield to grow, at least in line with inflation. Enthusiasm for the sector waned in the 1980’s and 1990’s because of fat Stock Market returns. In this day and age, however, pension funds are desperate to diversi

on have benefited from the convergence of Western investors looking to snatch up buildings at rock-bottom prices. Bulgaria is the latest example of this trend.

Commercial real estate is all part of the same ‘search for yield’ trend that has seen investors hunting around the globe for other high-income assets. It is all part of globalization and governments – especially Western governments – see it in a positive light. Because of this the gap between yields on the highest-quality properties and the second-tier sites, especially those located in what used to be second-tier nations, has narrowed everywhere.

Commercial property is a hybrid asset. It offers high yield, giving it bond-like characteristics. And moreover like shares and unlike bonds, investors can expect that yield to grow, at least in line with inflation. Enthusiasm for the sector waned in the 1980’s and 1990’s because of fat Stock Market returns. In this day and age, however, pension funds are desperate to diversi

and the second-tier sites, especially those located in what used to be second-tier nations, has narrowed everywhere.

Commercial property is a hybrid asset. It offers high yield, giving it bond-like characteristics. And moreover like shares and unlike bonds, investors can expect that yield to grow, at least in line with inflation. Enthusiasm for the sector waned in the 1980’s and 1990’s because of fat Stock Market returns. In this day and age, however, pension funds are desperate to diversify from shares and bonds, and commercial property is benefiting from capital being diverted by investors from the Stock Exchange.

Not everything is rosy, though. The catch is the lack of liquidity. It takes time and know-how to buy and sell a building, especially in farfetched places, and recruiting and managing tenants as well as maintaining and up-keeping those buildings involves an organization all by itself. So as the market develops, investing becomes more and more sophisticated.

The key to the growth of the commercial property markets and their widespread globalization has been the ever-increasing development of REIT’s or Real Estate Investment Trusts. These are companies quoted in the Stock Market that bundle together portfolios of buildings, allowing investors to buy and sell whenever and wherever they wish.

Luigi Frascati