Debt and equity capital are the lifeblood of commercial real estate. When the flow of capital is disrupted, as it was in 2009, transactions grind to a halt and values decline as the liquid and seamless flow of property from banks to the permanent markets get kinked.
2019 was the best year of the last decade from liquidity to commercial real estate. Interest rates reversed course and set record lows with a 10-Year Treasury dipping below 1.5%. Property fundamentals stayed strong (low vacancy and strong absorption) despite additions to new supply, especially in multifamily and industrial. Commercial property prices also rose to their highest level in the Green Street Advisors CPPI index.
Despite 2019’s successes, there are risks on the horizon for 2020. For example, record C-RE concentration levels in the banks, LIBOR transition in 2021, and fully-priced markets with nowhere for Cap Rates to go but up from these historic low levels. These risks raise several questions about the future of the industry. Will bank regulators force banks to tighten CRE underwriting to stem the rise in CRE lending? Will implementation of lease accounting alter whether certain property types are owned versus leased? Can property values keep pace with rising construction costs? Will capital warm to financing adaptive reuse projects, vertical warehouses, tiny home subdivisions, and hotels with more retail than just a gift shop and restaurant?
These questions and more will be posed to an all-star panel of Alabama real estate capital experts skilled in construction, mini-perm, and permanent real estate finance at ACREcom 2020 on February 7, 2020. The panel includes Chad Hagwood of Hunt Real Estate Capital, Cynthia Stanford from Regions Bank, and Steve Clikas of Protective Life. Hagwood specializes in multifamily finance and access to the GSEs (Fannie Mae and Freddie Mac), Clikas is a long-term investor with permanent capital, and Stanford is an expert in engaging with construction and mini-perm finance.
Before you transact commercial real estate in 2020, get updated on what the leading Alabama commercial real estate capital sources think about the availability of capital for more CRE in 2020.
Visit ACREcom.info for more information or to register.