Will interest rates increase twice this year?

embedYes, investors, interest rates will go up this year.

Here’s the question we really want answered: Will two rate hikes happen before Christmas?

Historically, multiple successive rate hikes have followed a period of prolonged low interest rates. This was the case at the conclusion of the low-rate periods of the early 1990s and mid 2000’s. Read more

Massive tech disruption aims at commercial real estate

virtual_reality_photoThere can be no more excuses for falling behind the curve in adopting technology in commercial real estate. Ready or not, a major disruption is unfolding in our industry.

It’s no secret CRE professionals have been lukewarm to new technologies. Meanwhile, the rest of the world is accelerating adoption quickly, which is why CRE is now playing catch-up. Read more

Are smart retail borrowers defeasing now?

Borrowers sprinted to defease their retail properties in the early months of 2015.

graphicAbout 300 percent more borrowers defeased loans for retail properties in the first quarter this year compared to 2014, according to a Defease with Ease® analysis of Bloomberg data. The trend signals the Wall of Maturities, along with fear of rising rates, is prompting a greater sense of urgency to consider a sale or refinance of their CMBS loan early. Approximately $300 billion in defeasance-eligible loans will mature between now and 2017. Read more

Redefining the Traditional Office Space

Redefining Office Space PictureAccording to a recent article by Richard Carr of National Real Estate Investor, there is “growing preference for open spaces over traditional offices, efficiency over expansion, secondary markets over class-A buildings in primary cities and, in some markets, a new trend of preferring low-rise buildings or lower floors in high-rise buildings to higher-priced floors at the top.”
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Nationwide, Retailers are Pulling Out of Shopping Centers

11788630744_1faaf5f939According to Bloomberg, shopping centers across the country are still struggling to fill empty store fronts from retailers who went out of business years ago.

Reis, a company which has analyzed the CRE industry for over 30 years, says that over the last year, vacancies at U.S. regional malls rose from 7.9% to 8% in the fourth quarter. This is due in part to Sears Holdings Corp. store closures. Unfortunately, as more and more national retailers (i.e., RadioShack, J.C. Penny Co., Borders, etc.) close stores, the real estate recovery for neighborhood and community shopping centers will remain extremely slow.
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Apartment Investors; Millennials Turn to Suburbs

According to a recent Bloomberg article, “after years of clamoring to buy the most centrally located rental buildings in major urban centers, U.S. apartment investors are rediscovering the suburbs.”
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Nationwide, purchases of apartment buildings outside the urban core climbed 8.2% last year to a value of $82.5 billion.
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Multifamily is where it’s at in 2015

Last week, members of the Commercial Defeasance team attended the RealShare conference in Miami. During the conference, over 250 CRE leaders discussed issues and trends related to the multifamily sector in the Eastern U.S.
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It was clear that attendees wanted to know if a decrease in home ownership is a paradigm shift or a demographic shift. They also discussed how certain trends are benefiting the multifamily industry.

According to recent statistics, the U.S. homeownership rate fell to the lowest level in more than two decades. This has caused vacancy rates for rental homes to decrease. U.S. vacancy rates for rented homes fell to 7 percent in the fourth quarter, down from 8.2 percent a year earlier and the lowest since 1993.
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The Future of Retail

Until recently, street retail throughout the country had fallen out of favor and into disrepair. Millennials and empty nesters are moving back to the cities, and investors are once again increasing their portfolio allocation in the street retail category.
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“We’ve been in street retail for a long time, but it’s a greater focus for us now,” says Christopher Conlon of Acadia Realty Trust. “Previously, street retail made up a much smaller percentage of our portfolio, but we chose to make it a big part of our growth plan coming out of the recession.”
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Commercial Loan Originations on the Rise

According to Jamie Woodwell, VP of Commercial Real Estate Research at the Mortgage Bankers Association, “Rising property values, improving property fundamentals, lower interest rates and higher loan maturity volumes should all help boost mortgage borrowing and lending in the coming year.”
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The Mortgage Bankers Association (MBA) predicts that originations of commercial and multi-family mortgages will grow to $414 billion in 2015. This is an increase of 7% over last year.

In fact, according to the MBA’s quarterly survey of the top commercial and multi-family mortgage originations firms, there was an 11 % increase in loan originations during the fourth quarter of 2014. Multi-family and industrial properties had the most loan originations during that time period.
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Demand for Health Care Properties

Since the recession, senior housing, medical-office buildings and other health-care-related properties have been outperforming most other commercial real estate categories.

Recent data from Marcus & Millichap showed that approximately $5 billion in medical-office buildings in the U.S. were sold in 2014 – compared to $4.3 billion in 2013.
Medical Office
This should not come as a surprise. As baby boomers retire, the over–65-age bracket will grow by 36 percent and that age group traditionally consumes three times the medical services of younger people. Additionally, due to the Affordable Care Act, more individuals have access to health care, which means office visits are on the rise and space is in great demand.
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