Potential ‘Reset’ For CRE

The commercial real estate industry may hit the “reset” button this year after a dynamic 2018, said Berkadia Executive Vice President and Head of Production Ernie Katai.

“The market absorbed the heavy interest rate increases of 2018, but interest rate uncertainty in the year ahead could impact the current level of investor interest,” Katai said.

Investment sales brokers and mortgage bankers generally agree commercial real estate ended the year on a high note despite four interest rate increases in 2018, Berkadia’s Powerhouse Poll found. More than four out of five of the 151 CRE professionals surveyed said deal volume met or exceeded their expectations last year. But just as many respondents–81 percent of mortgage bankers and 83 percent of investment sales brokers–expressed concern about potential interest rate increases this year.

Katai cited “strong” available capital at the moment; 77 percent of respondents said they anticipate available capital to increase or remain the same compared to last year. He said the industry might see more larger-scale transactions than in years past.

No one can predict the future for government-sponsored enterprises Fannie Mae and Freddie Mac, but mortgage bankers are confident of one thing: the GSEs will remain the lenders of choice. More than 80 percent of respondents said they expect the GSEs will provide most multifamily financing this year.

“There may be more smoke than actual fire around the issue of GSE reform as the Administration focuses on other priority issues,” Katai said. “Until we have further clarity on what reform will look like, we expect investors to keep their foot on the gas when it comes to deal activity.”

Nearly 85 percent of mortgage bankers and 78 percent of investment sales brokers agreed they have significantly increased technology use to improve processes in the past year, the report said. “New commercial real estate technologies have increased efficiency and transparency in the market, speeding up everything from underwriting to marketing,” Katai said.

“Information and data are more readily available than ever before, creating a level playing field across the industry and making personalization of relationships that much more valued.”

When asked what types of technology will affect commercial real estate the most, big data (55 percent), artificial intelligence (12 percent) and Blockchain (10 percent) ranked at the top, Katai said.