This year, commercial real estate investors are expected to make less risky decisions and less purchases than they did in 2015. After six years of recovery in commercial property values, they show signs of dropping.
“We’re getting late in the cycle,” Mark Myers, head of the commercial real estate business at Wells Fargo & Co. told Bloomberg in a telephone interview. “If the economy continues to grow ever so slowly, demand for commercial real estate will continue to grow ever so slowly. To the extent that the economic climate goes in the wrong direction, it’s going to have an impact on demand for commercial real estate.”
In January, the Federal Reserve surveyed senior loan officers and found that “tighter bank underwriting criteria already had reduced the availability of credit for commercial property owners at the end of last year,” according to The Real Deal. They accredit a surplus of new condos and hotels as commercial buildings after a construction boom in cities like New York and our own Miami.
There is currently less availability of credit for commercial real estate investors, and loan prices are climbing. The Real Deal says that the issuance of commercial mortgage backed securities, or CMBS, has decelerated. This means that loaners need to find alternative financing for their investments. It also means commercial properties are losing some value.
“We’re going to see more private lenders taking up the vacuum left by regulated lenders leaving the sector,” Richard Mack, chief executive officer of Mack Real Estate Credit, told Bloomberg. “The process by which this occurs is going to be volatile and that’s part of what we’re living through now.”
Interested in our commercial real estate opportunities at RE/MAX Paradise? If you have any questions or concerns about the current market, please reach out to our informed agents today!