Commercial real estate prices in some parts of the U.S. are surpassing records set before the financial crsis of the last decade. But one of the leading figures in the property markets sees little reason to worry.
Prices in the "gateway" cities - New York, Chicago, Los Angeles, San Francisco, Boston and Washington, DC -- are soaring. For instance, Chicago’s office buildings' valuations hit a record high in the second quarter, according to Real Capital Analytics. The industry tracker also found New York and Los Angeles reached post-2009 highs.
But not everyone is rattled by real estate bubble concerns. “I don’t think we’re at a risk for any type of bubbles, right now,” said Don Peebles, chairman and ceo of Peebles Corporation, the nation’s largest African American-owned real estate company.
Peebles contradicted the findings, “office space, office buildings are pretty sluggish right now.” He added, “I think that real estate right now is in a very good place, on the residential side, on the multifamily rental side.”
The real estate mogul sees opportunities in the gateway markets, where he sees constrained supply. But some of those cities are showing reason for concern.
Rising prices in places like New York City are making it “almost impossible, not just for working class people” to afford homes, said Peebles. “I think those who would be considered middle-class and upper income residents, they’re being priced out of the market as well.”
The real estate developer is looking to satisfy both luxury and more affordable housing demands but he is aware of the challenges.
“The cost to build a new construction is so significant that the actual cost is sufficient to price people out of the market place,” he said.
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