James Real Estate RE Inv Criteria Dnvr 2000 3rd Qtr Page 1
JAMES REAL ESTATE SERVICES, INC.
DENVER METROPOLITAN AREA
REAL ESTATE INVESTMENT CRITERIA
3rd Quarter, 2000
William J. Appleby
William M. James, MAI
While interest rates have fallen recently, little change has occurred in the rates used in real estate
investment and analysis. The move toward stabilization noted in the late 1980s has continued into the
1990s. Investors who survived changes in tax laws and overly-optimistic growth forecasts have become
more cautious. Properties are now most frequently analyzed based on current cash flow, although
institutional investors continue to forecast rentals, vacancies and expenses in discounted cash flow
analyses. Optimism, combined with cautious growth projections, results in relatively stable analysis rates.
The increased availability of capital is coming from a wide array of sources, including Real Estate
Investment Trusts (REITs), pension funds, life companies, and most recently conduits. Low rates have
stimulated the lending markets. Many experts believe that current pricing expectations are realistic.
However, others believe that there is too much capital chasing too few fundamentally sound deals. The
availability of capital continues to create upward pressure on real estate prices, resulting in lower yields
and recently increased risk.
The data compiled below were published by the Korpacz Real Estate Investor Survey, Cushman
& Wakefield, the Real Estate Research Corporation, the National Real Estate Investor Magazine,
Integra/Joseph Farber and Company and the National Real Estate Index. The Real Estate Research
Corporation and the Korpacz Real Estate Investor Survey differentiate among varying classes of
properties providing insight to levels of performance expected from the spectrum of investment
properties. Generally, data reflects the national real estate market. Where available, Denver and
Western data complement the tables.