Brokers, Mortgage Bankers Anticipate CRE ‘Momentum’

The commercial real estate sector’s current momentum should continue at least through 2018, said Berkadia, New York. 

The firm surveyed nearly 150 investment sales brokers and mortgage bankers to assess opportunities. Nearly three-quarters of mortgage bankers said they expect no downturn in the multifamily lending space this year, Berkadia said. Respondents predicted deal volume will either increase or remain the same from 2017.

More than 80 percent of mortgage bankers said the same for deal value. Expectations run high on the investment sales side as well; 72 percent of brokers said they expect the number of transactions will either increase or stay the same as last year and 81 percent of brokers said the same about deal value.

“We anticipate the new tax law and employment growth will have the most impact on the market in the coming year,” said Ernie Katai, Executive Vice President and Head of Production with Berkadia.

Katai called the new tax law and strong employment figures even more important than anticipated interest rate hikes as a boon to commercial real estate. “Those [interest rate] increases have largely been telegraphed by the Fed, so investors have forecasted this in their plans for the year,” he said.

Investing and lending alike should flourish in the southeast, southwest and western U.S; Berkadia said. Nearly 85 percent of all survey respondents said they anticipate the most deal activity in these three regions. Mortgage bankers were particularly bullish on the southeast as a hotbed for activity; 36 percent said they expect to see the most deals take place there.

“Population influx, continued job growth and significant development stabilization will make the southeast a destination for commercial real estate growth and investor appetite in the coming months,” Katai said. “Younger generations who are looking to take advantage of low costs of living and increased opportunity to build their careers are turning to the southeast to serve these needs. As this renter activity spikes, investment opportunities will follow and investors will seek financing in the growing region.”

Several specialty sectors could see increased activity, Katai said, noting nearly four in 10 investment sales brokers said senior housing will see more activity this year than last, driven by the aging Baby Boomer population. In addition, as the American population continues to age, “we’re seeing a heightened demand for independent and assisted living and skilled nursing facilities throughout the country,” he said.

Another area that will likely see more activity is affordable housing; one-third of investment sales brokers expect increasing activity in the sector going forward, the report said.

Berkadia brokers also said they anticipate investors will find more opportunities to invest in industrial real estate–37 percent said this sector holds more opportunity this year than in years past. Katai noted continuing growth in ecommerce and the need for modern distribution space will bolster the industrial market.