Wednesday, September 11, 2013

Federal Reserve Sees Clearer Skies Ahead for Commercial Real Estate

  


ATLANTA, GA– While most of the country experienced a rainy summer, the Federal Reserve sees clearing skies ahead for the commercial real estate market.

Brian Bailey
 That was the consensus on the most recent episode of the “Commercial Real Estate Show” radio program, hosted by Michael Bull of Bull Realty. Bull and his guest, Brian Bailey, a senior financial policy analyst for the Federal Reserve Bank of Atlanta, discussed banks, job creation and how Obamacare will affect commercial real estate going forward.

 Commercial real estate is beginning to experience some real vibrancy, Bailey said. Vacancy rates continue to move down, even in hard-hit sectors like retail. The uptick in online sales has caused industrial vacancies to fall as online retailers add distribution centers to fulfill higher-than-ever demand, he added.

Michael Bull
 Banks play an important role in commercial real estate, and one of the Fed’s main responsibilities is to help banks remain profitable and safe. Banks currently have about $1.4 trillion worth of commercial real estate loans outstanding on their books, Bailey said.

 The country currently is in the midst of a unique part of the business cycle, one that is driven by three factors, Bailey said. First, interest rates are relatively low, which has driven down cap rates; hence property values have increased. Second, because interest rates are low, debt-service requirements have decreased. Finally, the economy is improving, Bailey said.

 “You don’t have those three factors converge for a very long period of time, so the market has to be mindful of that,” he said. “Commercial real estate is a capital-intensive business, and at points banks have done a good job of meeting this need and turning a profit.”

 The entire show on the Fed's view of commercial real estate is available for download at www.CREshow.com. The next “Commercial Real Estate Show” will be available on Sept. 12 and will feature an update on tax credits.

 For a complete copy of the company’s news release, please contact:

Stephen Ursery
The Wilbert Group
404.405.2354

sursery@thewilbertgroup.com

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