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Commercial Real Estate Will Remain Attractive to Investors, Professor Says

Commercial Real Estate Will Remain Attractive to Investors, Professor Says
06/28/2013 | by Mitch Irzinski

Dan French, director of The Smith Institute of Real Estate at the University of Missouri, joined REIT.com for a video interview in Chicago at REITWeek 2013: NAREIT’s Investor Forum.

French described which fields of the real estate industry his students are most interested in studying, as well as some of the most common misconceptions that they have regarding the industry.

“I think that probably the most common goal of our students is to get into the commercial real estate industry,” he said. “Probably the common misconception among students is that the real estate industry is sales. Of course that’s an important part of it, but just like the banking industry is not just commercial loan officer and teller, there are many things involved in the industry.”

French shared his research findings related to the most pressing issues pertaining to real estate and corporate governance.

“We’ve looked at the relationship between a strong mission statement and leverage,” he said. “You might expect that a company with a strong mission statement would be trusted more by potential lenders, and so we might expect to see a strong positive relationship between debt and a strong mission statement, and that is exactly what we find for REITs.  Those REITs that have stronger statements are able to go to the markets and borrow more money.”
French also shared his opinion on whether commercial real estate will continue to be an attractive asset class for investors.

“I do think it will continue to be an asset class that is popular—it’s certainly popular among our students,” he said. “Our Smith Institute of Real Estate Forum, which we held just last month—we  had Kenneth Langone, the founder of Home Depot as our guest speaker. We had over 400 students and 165 professionals attending. Certainly real estate is cyclical, and the interest in it is cyclical, but it seems that every cycle builds on the previous one, and I see that continuing on for the intermediate future.”