Trends Impacting the Real Estate Market – Key Concerns for Investors, Developers and Owners (Volume I)
What trends are impacting the commercial real estate market? EisnerAmper Partner Aaron Kaiser interviews Tom Fink, Senior Vice President and Managing Director of Trepp LLC to get his perspective on the factors driving deals and what is on the horizon for real estate investors. Mr. Fink, a recognized national expert on the commercial mortgage-backed security markets, discusses where the markets have been in the recent past and where they are likely to head-going forward. This video collection includes Trepp market research and analysis.
Current State of the Market
How is the commercial real estate market doing this year and where are we headed? Tom Fink, Senior Vice President and Managing Director, Trepp LLC, responded by saying, “All of the commercial debt markets are healthy.” He is amazed by the amount of foreign capital coming into the US with the dedicated purpose of making commercial real estate loans.
Also noted is the fact that the real estate industry has made a strong rebound since 2009 – it’s healthy, back on its feet and active. Rates continue to be at a historic low and there is still a huge amount of stimulus outstanding. Mr. Fink stated there doesn’t appear to be anything in the marketplace that is going to push rates higher in the near term. There’s a lot of money out there looking for good investments.
Future Trends in the Real Estate Market
In this segment Tom Fink discusses the estimated upcoming commercial real estate debt maturities with annual maturities by lender type. It demonstrates that there is still around $1 trillion of debt coming due from 2015 to 2017.
The last 3 years have shown a continued erosion of the amount that’s due in 2016 and 2017 as people pre-pay loans, as properties get sold and as distressed debt works out. There is a wall of maturity coming, in excess of $100M dollars, but the market has demonstrated the resilience to be able to address that and carry forward even in light of that coming volume.
When asked about the important emerging technologies in the marketplace, Tom Fink replies, “I think we still have a long way to go before technology is really a factor in the commercial real estate market space. But, I think it’s still an exciting time…There is a lot of room to grow."
He comments that commercial real estate still really loves its paper and its spreadsheets, but there has been more of an initiative to put the information on the internet so people can have access to it. The broker community seems to be a very popular target audience but he is starting to see more and more technologies that are targeted to help people that rent a lot of space in the market.
The New York real estate market is doing relatively well. How is New York doing compared to the country as a whole? Tom Fink illustrates by showing the nation sectioned into regions and shows the delinquency rate in each region.
From a real estate perspective, the best performing states are in the west coast region and a lot of the California market seems to be recovering nicely. The mid-Atlantic region, which encompasses NY, NJ and PA, is about middle of the pack on delinquency rates. New England continues to do well but is dominated by the Boston healthcare market. Outside of Boston, there are some challenges in the other areas. The west south central, which encompasses Texas, is “going gang busters… We have an energy rich economy today and Texas is an energy state, that’s why that area of the country is doing so well."
How are the commercial real estate markets doing in the rest of the world? From an equity perspective, there is a lot of money still available for pursuing equity investments in real estate around the globe. In terms of debt, Fink sees a number of U.S. clients beginning to open lending operations in Europe, which he thinks is a positive sign.
People are beginning to feel more comfortable globally, in terms of lending in the commercial real estate markets, but that is also a challenge for the United States. While the U.S. is one of the leading global markets for commercial real estate, returns are not as attractive as they may be in some of these other markets. On the other hand, liquidity is a big factor in the U.S. market. If someone wants to sell a building in the United States, there are people probably lining up to buy it.
- Trends in the Various Lending Classes within Real Estate
- Higher Interest Rates
- NY Delinquency Rate Performance
- Non Performing Debt
- Government Sponsored Organizations