Is A Commercial Bubble About To Pop?

[Gobears81]

While there certainly appears to be a bubble, there's still a lot of cash looking for yield and not finding it in the bond or equity markets.

I agree and recognize that as a primary driver of these cap rates, but the cap rate differential between so-called "armchair investments" vs properties leased to local tenants has perhaps swung too far. That is why I mention only passive investments as being particularly vulnerable to a bubble. There are some apartments in rural communities that could be purchased for 10%+ cap rates, and some of those tenants are long term, so there wouldn't be as much of a turnover expense. Yes, there would be much more of a requirement in management coordination, but I would feel much more confident about the reversion being near the initial purchase price, relative to a Class A retail property with above-market rents where the cap rate might be 6%-7%, but the real rate of return (yield) might end up being closer to 3%-4%.