U.S. Commercial Real Estate (CRE) is expected to have a positive year in 2014. Investors are continuing to borrow money for CRE investments. Credit performance is improving and the expectation is for lending restrictions to loosen in the coming year.
Though rising interest rates are expected in 2014, investors are happy right now to buy up long-term investments at current fixed mortgage rates. Banks, life insurance companies and CMBS, Commercial Mortgage Backed Securities lenders are all eyeing the commercial real estate market favorably.
The first half of this year saw a total volume of commercial and multi-family debt increase of $17.3 billion, to a total of $3.107 trillion, according to the Federal Reserve. With credit performance improving, further loosening of credit standards is expected next year and the momentum is predicted to continue.
Fears were that recent commercial mortgage rate increases would put a damper on commercial real estate borrowing. However, it appears that investors are happy to lock in any rate that begins with a “4” for purchases and projects. There are few analysts expecting anything other than more interest rate increases next year. Borrowers in the CRE markets are obviously seeing opportunity for value appreciation and higher rents to offset higher interest rates.
Short term borrowing rates are still down around 2%, with the ability to borrow at 175 to 180 points over LIBOR. If you can buy assets at above a 4.0 cap, it’s still a good market opportunity. With the Fed refusing to raise short term rates in the belief it will hurt the economy, some commercial market borrowers are using these historically low short term rates instead of long term borrowing.
The CMBS market has nearly doubled lending this year, approaching $90 billion, with last year’s total at $45.8 billion. Though commercial real estate financing isn’t anywhere near the pre-2007 levels, it’s improving and expected to show excellent results in 2014.
Residential real estate investors can watch where this money is going and possibly get in front of improving economic trends in specific areas. Rental property investment may provide better yields where commercial investment is flowing.
U.S. Commercial Real Estate (CRE) is expected to have a positive year in 2014. Investors are continuing to borrow money for CRE investments. Credit performance is improving and the expectation is for lending restrictions to loosen in the coming year.
Though rising interest rates are expected in 2014, investors are happy right now to buy up long-term investments at current fixed mortgage rates. Banks, life insurance companies and CMBS, Commercial Mortgage Backed Securities lenders are all eyeing the commercial real estate market favorably.
The first half of this year saw a total volume of commercial and multi-family debt increase of $17.3 billion, to a total of $3.107 trillion, according to the Federal Reserve. With credit performance improving, further loosening of credit standards is expected next year and the momentum is predicted to continue.
Fears were that recent commercial mortgage rate increases would put a damper on commercial real estate borrowing. However, it appears that investors are happy to lock in any rate that begins with a “4” for purchases and projects. There are few analysts expecting anything other than more interest rate increases next year. Borrowers in the CRE markets are obviously seeing opportunity for value appreciation and higher rents to offset higher interest rates.
Short term borrowing rates are still down around 2%, with the ability to borrow at 175 to 180 points over LIBOR. If you can buy assets at above a 4.0 cap, it’s still a good market opportunity. With the Fed refusing to raise short term rates in the belief it will hurt the economy, some commercial market borrowers are using these historically low short term rates instead of long term borrowing.
The CMBS market has nearly doubled lending this year, approaching $90 billion, with last year’s total at $45.8 billion. Though commercial real estate financing isn’t anywhere near the pre-2007 levels, it’s improving and expected to show excellent results in 2014.
Residential real estate investors can watch where this money is going and possibly get in front of improving economic trends in specific areas. Rental property investment may provide better yields where commercial investment is flowing.