Skip to main content
IRR in the News

IRR in the News

IRR experts are well-respected and trusted CRE professionals. They are often featured in local, national, and global news media to provide sought after insights, expertise, and an independent perspective to stories affecting commercial real estate markets worldwide.

Learn More

Anthony M. Graziano on Real Estate Investing for the Miami Herald Sep 3, 2017

Anthony M. Graziano
MAI, CRE
Chairman for IRR, Integra Realty Resources - Miami/Palm Beach
Anthony M. Graziano on Real Estate Investing for the Miami Herald

Real Estate 101: What if our predictions are wrong?
from: The Miami Herald

By: Anthony M. Graziano, Chairman of Integra Realty Resources and Senior managing director for IRR-Miami/Palm Beach 

I spend a good deal of my professional life forecasting the current value of commercial real estate. The concept is fairly simple; it is the mantra of all valuation; “The value of real estate is represented by the present worth of future benefits.”

In real estate terms, we convert future benefits into economic forecasts. How much income will a property generate annually after all expenses are paid? How long will I hold the asset, and how much income (benefit) will I receive during my holding period? How much will I receive when I sell the asset in the future? These components drive your willingness to pay today.

Invariably, our near-term forecasts tend to be fairly reliable. The problem is, in most commercial real estate investments, the value of the near-term income stream only makes up about 30 percent to 50 percent of the realized return. The balance of the asset’s performance is locked up into the future when you sell the asset, and oftentimes comprises 50 percent to 70 percent of the total return. More than half of the investment’s value is tied to your expectation of the more distant future.

So my firm started looking at our real estate forecasting methods, and those of our professional peers. What we observed is that most appraisers, and a great many investors, hold as their core expectation that the future sale (value) of the asset will grow over time at 3 percent per year.

The problem is that this is not an independent forecast: It is at best an assumption. And our study of longer-term price history over a 25- to 50-year time frame convinces me that the longer you hold an asset, the more likely it is that the 3 percent inflation factor of real estate is woefully low. In many cases, we have revealed property appreciation rates over 20-50 years that approach 15 percent average annual appreciation. Even having bad market timing, and buying at the top of a cycle in 1960, and selling at the bottom of a cycle in 2010 yielded growth rates of 4 percent to 5 percent annually.

To be sure, when you enter the market and when you exit can produce outsize appreciation. Acquiring property in 1970 or 1950, different economic factors were at play. But I can report unequivocally that no one bought a piece of property in 1970 and sold it in 2000 for less money, or for even anything close to only 3 percent annual appreciation of the real estate. In fact, what we’ve found over longer time-series studies is that appreciation rates on acquisitions pre-1980 have average annual appreciation rates greater than 10 percent.

The armchair economists will decry the 1980s as a period of high inflation that artificially spiked these appreciation rates. I agree wholeheartedly: Asset prices were lifted tremendously between 1976 and 1988. These values also crashed spectacularly in 1989 after a national savings and loan bailout and the ensuing Resolution Trust Corp. liquidation of bank real estate assets in the early 1990s.

During the RTC days of 1991-92, analysts were predicting it would take 25 years before asset prices normalized. By 1997-98, asset prices were back to “peak,” and by 2002, people were anxiously awaiting another real estate downturn. It took another six years until 2008 for asset pricing to collapse after massive economic shocks that brought the world economies to the brink of disaster.

We sit here now 10 years later back at “peak” pricing wondering when the next economic shock will send asset pricing down.

I’m here to tell you today: It does not matter. Real estate asset values are fundamental to all economic activity. If your real estate is located in an area with a growing population, it will get more valuable faster, in many cases much faster, than the rate of inflation.

Unlike stocks and bonds, the value of real estate will never go to zero. And if you time the market right, get a little lucky on location, and don’t overleverage so you can ride out periodic downturns, nothing performs better than real estate.

So what if our assumptions on future value are wrong? Then current asset pricing is too conservative, and buying at today’s pricing will provide a much higher return than anticipated.

Will Rogers said it best: “Don’t wait to buy land, buy land and wait.”

Locate an office

Each IRR office is led by an MAI-designated Senior Managing Director, industry leaders who have over 25 years, on average, of commercial real estate experience in their local markets.
Click to zoom in/out Denver, CO 2000 S. Colorado Blvd
Suite 10800 Tower 1
Denver, CO 80222
Phone: 303-300-3320
Fax: 303-300-3789
Boston, MA Faneuil Hall Marketplace
4 South Market Building, 4th Floor
Boston, MA 02109
Phone: 617-451-9110
Fax: 617-451-0039
Seattle, WA 600 University Street
Suite 310
Seattle, WA 98101
Phone: 206-903-6700
Fax: 206-623-5731
Portland, OR 1220 SW Morrison Street
Suite 800
Portland, OR 97205
Phone: 503-222-7066
Fax: 503-274-8630
Boise, ID RiverWalk Center
1661 W. Shoreline Dr. Suite 200
Boise, ID 83702
Phone: 208-342-2500
Fax: 208-342-2220
Salt Lake City, UT 5107 South 900 East
Suite 200
Salt Lake City, UT 84117
Phone: 801-263-9700
Fax: 801-263-9709
Las Vegas, NV 8367 West Flamingo Road
Suite 100
Las Vegas, NV 89147
Phone: 702-869-0442
Fax: 702-869-0955
Phoenix, AZ 5225 North Central Ave.
Suite 235
Phoenix, AZ 85012
Phone: 602-266-5599
Fax: 602-266-1515
Sacramento, CA IRR-Corporate
Sacramento, CA 95811
Phone: 212-255-7858
Fax: 646-424-1869
San Francisco, CA IRR-Corporate
San Francisco, CA 94104
Phone: 212-255-7858
Fax: 646-424-1869
Metro LA 150 South Los Robles Avenue
Suite 850
Pasadena, CA 91101
Phone: 626-792-2107
Fax: 626-792-4180
Los Angeles, CA 16030 Ventura Boulevard
Suite 620
Encino, CA 91436-4473
Phone: 818-290-5400
Fax: 818-290-5401
Orange County, CA IRR-Corporate
Laguna Hills, CA 92653
Phone: 212-255-7858
Fax: 646-424-1869
San Diego, CA 5330 Carroll Canyon Road
Suite 100
San Diego, CA 92121
Phone: 858-259-4900
Fax: 858-259-4910
Miami, FL 9155 S. Dadeland Boulevard
Suite 1208
Miami, FL 33156
Phone: 305-670-0001
Fax: 305-670-2276
Naples, FL 2770 Horseshoe Drive S
Suite 3
Naples, FL 34104
Phone: 239-643-6888
Fax: 239-643-6871
Tampa, FL 550 North Reo Street
Suite 220
Tampa, FL 33609
Phone: 813-287-1000
Fax: 813-281-0681
Orlando, FL 326 North Magnolia Avenue
Orlando, FL 32801-2431
Phone: 407-843-3377
Fax: 407-841-3823
Jacksonville, FL IRR-Corporate
Jacksonville, FL 32217
Phone: 212-255-7858
Fax: 646-424-1869
Charleston, SC 11-C Isabella Street
Charleston, SC 29403
Phone: 843-718-2125
Fax: 843-718-2058
Atlanta, GA IRR-Corporate
Atlanta, GA 30309
Phone: 212-255-7858
Fax: 646-424-1869
Birmingham, AL 880 Montclair Road
Suite 275
Birmingham, AL 35213
Phone: 205-949-5995
Fax: 205-271-2389
Jackson, MS 200 Trace Colony Park Drive
Suite B
Ridgeland, MS 39157
Phone: 601-714-1665
Fax: 601-500-5314
Dallas, TX 1100 Mira Vista Blvd.
Suite 300
Plano, TX 75093
Phone: 972-732-0051
Fax: 972-733-1403
Fort Worth, TX 1100 Mira Vista Blvd.
Suite 300
Plano, TX 75093
Phone: 972-732-0051
Fax: 972-733-1403
Austin, TX 401 Congress Avenue
Suite 1540
Austin, TX 78701
Phone: 512-924-1345
Fax: 646-424-1869
Memphis, TN 700 Colonial Road
Suite 102
Memphis, TN 38117
Phone: 901-322-1701
Fax: 901-767-4918
Tulsa, OK IRR-Corporate
Tulsa, OK 74136
Phone: 212-255-7858
Fax: 646-424-1869
Kansas City, MO/KS IRR-Corporate
Westwood, KS 66205
Phone: 212-255-7858
Fax: 646-424-1869
Providence, RI 365 Eddy Street
Providence, RI 02903
Phone: 401-273-7710
Fax: 401-273-7410
Syracuse, NY 120 East Washington Street
Suite 525
Syracuse, NY 13202
Phone: 315-422-5577
Fax: 315-422-5295
Hartford, CT 97 Broad Street
Middletown, CT 06457
Phone: 860-291-8997
Fax: 401-273-7410
New York, NY IRR-Corporate
New York, NY 10036
Phone: 212-255-7858
Fax: 646-424-1869
Northern New Jersey IRR-Corporate
Whippany, NJ 07981
Phone: 212-255-7858
Fax: 646-424-1869
Coastal New Jersey 1415 Hooper Ave.
Suite 306
Toms River, NJ 08753
Phone: 732-244-7000
Fax: 732-505-9498
Philadelphia, PA IRR-Corporate
Philadelphia, PA 19102
Phone: 212-255-7858
Fax: 646-424-1869
Wilmington, DE IRR-Corporate
Wilmington, DE 19805
Phone: 212-255-7858
Fax: 646-424-1869
Baltimore, MD IRR-Corporate
Baltimore, MD 21031
Phone: 212-255-7858
Fax: 646-424-1869
Washington, DC IRR-Corporate
Washington, DC 20002
Phone: 212-255-7858
Fax: 646-424-1869
Pittsburgh, PA 2591 Wexford Bayne Road
Suite 102
Sewickley, PA 15143
Phone: 724-742-3300
Fax: 724-742-3390
Cleveland, OH 4199 Kinross Lakes Parkway
Suite 235
Richfield, OH 44286
Phone: 330-659-3640
Fax: 330-659-3645
Columbus, OH 6241 Riverside Drive
Dublin, OH 43017
Phone: 614-764-8040
Fax: 614-764-8050
Saint Louis, MO IRR-Corporate
Saint Louis, MT 63105
Phone: 212-255-7858
Fax: 646-424-1869
Chicago, IL IRR-Corporate
Chicago, IL 60603
Phone: 212-255-7858
Fax: 646-424-1869
Minneapolis, MN 8012 Old Cedar Avenue South
Minneapolis, MN 55425
Phone: 612-339-7700
Fax: 612-339-7937
Nashville, TN 1894 General George Patton Drive
Suite 300
Franklin, TN 37067
Phone: 615-628-8275
Fax: 615-628-8286
Richmond, VA 7110 Forest Avenue
Suite 202
Richmond, VA 23226
Phone: 804-346-2600
Fax: 804-747-9140
Greensboro, NC 5411-A Friendly Avenue
Greensboro, NC 27410
Phone: 336-676-6033
Fax: 336-676-6025
Raleigh, NC 8382 Six Forks Road
Suite 200
Raleigh, NC 27615
Phone: 919-847-1717
Fax: 919-847-1714
Charlotte, NC 214 W. Tremont Ave.
Suite 200
Charlotte, NC 28203
Phone: 704-376-0295
Fax: 704-342-3704
Columbia, SC 500 Lawand Drive
2nd Floor
Columbia, SC 29210
Phone: 803-772-8282
Fax: 803-772-0087
Cincinnati/Dayton, OH 8241 Cornell Road
Suite 210
Cincinnati, OH 45249
Phone: 513-561-2305
Fax: 513-561-2881
Detroit, MI 400 W. Maple Road
Suite 100
Birmingham, MI 48009
Phone: 248-540-0040
Fax: 248-540-8239
Indianapolis, IN 4981 North Franklin Road
Indianapolis, IN 46226
Phone: 317-546-4720
Fax: 317-546-1407
Louisville, KY 13000 Equity Place
Suite 105
Louisville, KY 40223-3976
Phone: 502-452-1543
Fax: 502-451-3657
Caribbean Cayman Business Park #A5, P.O. Box 751
Grand Cayman, Cayman islands
Camana Bay, KY KY1-9006
Phone: 844-952-7304
Houston, TX 9225 Katy Freeway
Suite 206
Houston, TX 77024
Phone: 713-973-0212
Fax: 713-973-2028
San Antonio, TX 909 NE Loop 410
Suite 636
San Antonio, TX 78209
Phone: 210-446-4444
Puerto Rico 508 Asuncion St.
Puerto Nuevo Development
San Juan, PR 00920
Phone: 844-952-7304