Learn why experts say commercial real estate is on the rebound.
What is the current market like for commercial real estate? The article below talks about how commercial real estate has “rebounded”. Check it out below and decide for yourself.
The negative indicators in the commercial real estate sector appear to be dissipating. Although the economy has not yet fully recovered to pre-2008 levels, the current environment is much brighter than it was in 2008 and 2009.
The commercial real estate industry has historically been financially supported by commercial mortgage-backed securities (CMBS). In 2007, a record $ 230 billion dollars in securities were issued to real estate developers. Yet, only $ 3 billion in securities were issued in 2009. But it must be noted that the securities market is beginning to show a rebound in 2010.
As a buyer of commercial properties, the opportunities for profit are widespread… Throughout the country, values have bottomed, introducing a variety of attractive economic opportunities for investors.
There are still many distressed investors, around the country, as commercial real estate default rates increased from 1.6% in 2008, to 3.8% in 2009, and is expected to reach 5.1% in 2010.
Distressed investors and defaulted mortgages will continue to provide an awesome opportunity for more successful real estate investors to find commercial properties worthy of purchase at an attractive price, in various locations around the country.
Investors and banks are starting to return capital investment to the industry, albeit with tighter lending standards and requirements for larger down payments.
Of course, investors are seeking a higher rate of return on their investments, due to the lower interest rates available in the bond market. In other words, if you are willing to pay a little bit higher interest rates to secure investment money, then the money you need is more readily available than it was just a few months ago.
Most banks and investors are not putting their money to rescue distressed properties. Instead, banks and investors are seeking investments that promise a more secure return on their investments.
Banks and investors are financing high-equity loans and offering refinancing deals on high-quality loans as they mature.
The funds currently available in the marketplace may help some borrowers, whose properties have fallen in value, below what is currently owed on the property… But according to Deutsche Bank analyst Richard Parkus, most of the $ 1.4 trillion in mortgages that will mature by 2013 will not qualify for refinancing, unless the borrower is willing to put up more cash to secure the loan.
This reality may spell doom for some smaller investors. However, commercial real estate investors with substantial liquid assets will continue to be in a position to seize upon buying opportunities as they become available, in the next few years.
Despite what may seem like a negative buying market, there are a number of positive economic indicators that signal that the worst is behind us…
For example, Real Capital Analytics shows that commercial real estate prices fell 45% between 2007 and 2009. However, values have edged upwards 6% in the early months of 2010.
Other positive signs include the fact that nearly $ 13.7 billion in commercial real estate loan modifications have been written in the first few months of 2010.
Additionally, Tom Fink of the research firm Trepp has predicted that about $ 25 billion in CMBS will be issued in 2010… As of April 2010, $ 4 billion in CMBS deals had already been completed.
All indicators for 2010 suggest that it will be the beginning of a rebound… But, it is important to note that we are not completely out of the woods yet, but we are much closer today than we have been in the previous two years.
About the Author
Article by Wes McFarland
Wes McFarland covers the Houston real estate market. He follows the economy and its impact on the Houston commercial real estate market. Local trends are followed from information gathered from the City of Houston, Harris County, Houston MLS, and local agencies encompassed in the Greater Houston Metropolitan Area.
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Wes McFarland
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Use and distribution of this article is subject to our Publisher Guidelines
whereby the original author’s information and copyright must be included.