Investors are falling back in love with US commercial property.
There has been a flurry of big deals in recent weeks, the type of activity that virtually disappeared during the financial crisis. Money is flowing again, with office, retail and multi-family properties attracting interest from around the world.
The biggest move was Blackstone Group's US$9.4 billion (Dh34.52bn) deal last month to buy 588 shopping centres and assorted properties owned by Centro Properties Group. Considered the world's largest private equity firm, Blackstone also invested $500 million last year in the shopping mall owner General Growth Properties.
But Blackstone's interest in commercial property is not alone. Ventas is spending $5.7bn to buy out Nationwide Health Properties, a health care property investment trust. And the first major initial public offering in the US this year was a property investments trust, American Assets Trust, which raised $564m with its January 19 offering.
On a retail level, Google recently paid $1.8bn to buy its headquarters building in Manhattan, reviving memories of the days when dot-com companies competed to pay top dollar for US property.
"There were a bunch of global investors salivating over the building," said Dan Fasulo, the managing director of Real Capital Analytics.
Overall, investment in commercial property in the US is expected to jump 40 per cent this year compared with last year, according to Jones Lang LaSalle, the property company.
This represents a dramatic turnaround, considering the Armageddon predicted for the sector two years ago.
Commercial property was supposed to be the next great disaster facing the US economy, after the collapse of the residential market. A report by a congressional oversight committee estimated that half of the $1.4 trillion in commercial property loans set to be paid off by 2014 were underwater, with borrowers owing more than the property was worth.
Waves of defaults were expected. Office buildings, hotels and retail centres would turn into ghost towns and banks with heavy commercial exposures were sure to collapse, some analysts predicted.
But it didn't happen. The sector struggled and values in some areas fell 45 per cent from October 2007 to August last year, according to Moody's Investor Services. Defaults skyrocketed.
Yet the industry did not fall off the cliff, as some expected. And the woes of commercial property did not send the same shockwaves through the economy as the residential mortgage collapse.
The doomsayers got it wrong on several fronts. Unlike the residential market, the commercial property collapse didn't happen in a compact time period.
With the defaults spread out over a few years, financiers had a chance to catch their breath and work deals to maintain the market, aided by low interest rates.
At the same time, banks were able to keep properties off the market, preventing the type of flood of distressed properties that continues to plague US residential markets.
Vultures looking for bottom basement deals in prime locations were frustrated.
In key urban markets such as New York and Washington DC, top properties were not for sale, helping the overall market maintain values.
By all accounts, the commercial market bottomed out in the third quarter of last year.
Investors who were unable to find fire sale deals are now eager to buy quality properties with consistent yields.
Grade-A buildings - retail, office or apartments - in top tier cities are already attracting multiple bidders, agents report.
Investments in office properties more than doubled last year to $41.6bn, according to Real Capital Analytics.
Several factors are fuelling the deals. Interest rates are low, making yields from property more attractive.
And there is a perception that prices are bottoming out, or at the very least stabilising.
Office vacancies dropped to 16.11 per cent at the end of the year "almost certainly marking the beginning of a long decline in vacancy", Colliers International reported.
At the same time, fixed-income investments are providing paltry yields and securities are seen as risky, given the market's recent volatility.
Overseas investors are also turning to US property as a relatively safe haven. The US is inexpensive compared with London, which has been drawing the bulk of international interest in recent years.
Nevertheless, it is wrong to suggest a massive rush into US property is imminent. Investors have been burned too many times.
High unemployment, shaky consumer confidence and a volatile global situation will continue to dampen a speedy recovery.
Caution is still advised, especially with distressed properties, according to a recent survey of industry experts for the Urban Land Institute.
They spotlighted rental apartments, condominiums and office complexes in prime locations as the best targets.
But it is not a market for speculators or the weak of heart. History has proven that.