My team just put another $3.5m office building into contract at 3645 Grand Ave, Oakland, a $3.4m mixed-use building at 1015 University Ave, Berkeley, and we just closed a $900k multifamily at 1004 60th St in North Oakland and two buildings for over $3.4m at 1128-30 Bancroft Ave in Berkeley. Busy times.
What makes these days interesting? For starters, I sold both 1004 60th St and 1128-30 Bancroft Ave two years ago and now just sold them again for more than 100% return to the owners. That’s interesting. Another interesting fact is that interest rates have been lower for longer than at any time in the past century. I think people are getting used to that and have adjusted pricing and cash flow expectations accordingly. Result: high prices based upon current returns on equity.
What this all may mean is that prices over the next several years begin to overshoot long term sustainable trends. Read “we may see prices go up and then down from here.” What strategies might offer protection against a peaking or plateauing commercial property market? Here are some ideas:
• Obtain longer-term fixed rate loans

• Sell at a high price to lock in gains

• Do a combination of these things by selling at a high price, purchasing a larger more diverse, higher income portfolio and financing it with relatively longer fixed-rate debt
My most successful clients are pursuing paths similar to the combined approach above. They are growing their portfolios steadily and carefully through opportunistic sale, purchase and finance.

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Property values in Berkeley, Oakland, and throughout the Bay area have continued to increase, but much of the recent increase is driven by rental rate growth with low overall inflation. One of the drivers of continued real estate transactions at this time is real estate’s perceived resilience in both low and medium inflationary environments. If inflation remains low real estate provides a steady cash flow, if inflation increases somewhat, rents increase with inflation as do immediate cash flows from the property. Win-win.