Virtually everyone in commercial real estate these days will say things are better than they have been in some time. Nothing compares well with CRE activity in the good old days of 2007, but "off the bottom" is not a bad place to be when the industry's prospects over the next few years "could threaten America's already-weakened financial system," according to a recently released government report. The 183-page report was completed by the Congressional Oversight Panel, whose task was to assess CRE loan loss risk to the country's financial stability. Other observations in the report include that $1.4 trillion of loans come due between now and 2014, and 50 percent are underwater; and that there are nearly 3,000 banks with problematic exposure to commercial property. The panel's bleak assessment of the industry is probably close to accurate if all banks with more than 30 percent of their assets tied up in CRE loans closed shop tomorrow and liquidated. However, the reality is much different. So, what's making commercial real estate people more optimistic? Special servicers are so overwhelmed with problem loans it's forcing them to take action and dispose of what they can. The market has been waiting for this and views it as vital to commercial real estate's recovery. Another disturbing problem for many institutions was lack of clarity and direction from the government. While this problem still haunts many lenders, those that have good controls in place and are not overexposed to real estate are back in the game. The FDIC has not provided explicit direction on new lending activity, but its lack of ability to shut down banks with problematic loan exposure allows relatively healthy banks to move forward and go about their business. The other positive factor is a pickup in transaction activity, particularly in larger cities. The latest data from New York-based research firm Real Capital Analytics indicate that December 2009 transaction volume for commercial real estate deals larger than $5 million was up 75 percent from the same period a year earlier. Activity is a telling sign that we are moving away from the bottom.
Story via 2012 Real Capital Analytics Inc
Wednesday, December 5, 2012
Wednesday, November 7, 2012
TOP 10 COMMERCIAL REAL ESTATE TRENDS FOR 2013
Last month, the Urban Land Institute and thousands of CRE professionals convened in Denver for the ULIs Fall Meeting. There, the ULI and its research partner, PriceWaterhouseCoopers, revealed their 2013 Emerging Trends report. Here are my Top 10 Trends for Commercial Real Estate in 2013, based on ULI/PwCs forecast:
> Slightly improved employment numbers suggest a decrease in vacancies among office, industrial, and retail properties
> Multifamilys high demand is expected to continue, though multifamily development will be less profitable–in the next few years among low-barrier-to-entry markets
> As yields remain low in other investment sectors, investors demand for real estate is expected to remain strong or even increase
> Expect more opportunistic real estate ventures in 2013, the report says, with greater opportunity in secondary markets
> Office landlords will continue to seek out strong, stable tenants in growth industries
> 2013 transaction volume should exceed those of previous years but performance is contingent on the strength of the capital markets (and vice versa)
> Likewise, the report suggests an increase in CMBS activity
> Owners and developers are expected to benefit from quality, core projects with LEED certification and energy efficient features
> Industrial near the major distribution hubs will continue to flourish
> 2013 is also expected to present many opportunities for value-add projects and the repurposing of commercial buildings
Obviously, these are in no particular order. If youd like to see the ULIs full report, you can see the PDF.
As I always like to say, especially when reporting someone elses information, take this with a grain of salt. None of this is a guarantee. As many of us learned the hard way, investment advice isnt always correct, no matter how logical it is at the time. This report, reflecting the experience and expectations of real estate professionals, is essentially a logical extension of the conditions weve seen since the financial downturn: weakened capital markets high single-family vacancy and financing difficulties, which have boosted multifamily demand weak employment keeping vacancies high in retail and some industrial bearish investment and a retreat to core assets etc., all of which is the baseline from which our economy and real estate market are (slowly) improving. Will these predictions come true? Barring any crisis on the scale of the Great Recession, I would say yes. Still, nationwide reports only offer so much useful information. Unless youre a REIT or a major fund manager crafting your 5- or 10-year strategy, odds are youre probably thinking on a more local level. In that case, it may be best to go with one’s own experience and the wisdom of colleagues involved in the same market. U.S. real estate is extremely diverse; conditions vary by neighborhood.
article provided from http://llenrock.com/blog/
> Slightly improved employment numbers suggest a decrease in vacancies among office, industrial, and retail properties
> Multifamilys high demand is expected to continue, though multifamily development will be less profitable–in the next few years among low-barrier-to-entry markets
> As yields remain low in other investment sectors, investors demand for real estate is expected to remain strong or even increase
> Expect more opportunistic real estate ventures in 2013, the report says, with greater opportunity in secondary markets
> Office landlords will continue to seek out strong, stable tenants in growth industries
> 2013 transaction volume should exceed those of previous years but performance is contingent on the strength of the capital markets (and vice versa)
> Likewise, the report suggests an increase in CMBS activity
> Owners and developers are expected to benefit from quality, core projects with LEED certification and energy efficient features
> Industrial near the major distribution hubs will continue to flourish
> 2013 is also expected to present many opportunities for value-add projects and the repurposing of commercial buildings
Obviously, these are in no particular order. If youd like to see the ULIs full report, you can see the PDF.
As I always like to say, especially when reporting someone elses information, take this with a grain of salt. None of this is a guarantee. As many of us learned the hard way, investment advice isnt always correct, no matter how logical it is at the time. This report, reflecting the experience and expectations of real estate professionals, is essentially a logical extension of the conditions weve seen since the financial downturn: weakened capital markets high single-family vacancy and financing difficulties, which have boosted multifamily demand weak employment keeping vacancies high in retail and some industrial bearish investment and a retreat to core assets etc., all of which is the baseline from which our economy and real estate market are (slowly) improving. Will these predictions come true? Barring any crisis on the scale of the Great Recession, I would say yes. Still, nationwide reports only offer so much useful information. Unless youre a REIT or a major fund manager crafting your 5- or 10-year strategy, odds are youre probably thinking on a more local level. In that case, it may be best to go with one’s own experience and the wisdom of colleagues involved in the same market. U.S. real estate is extremely diverse; conditions vary by neighborhood.
article provided from http://llenrock.com/blog/
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