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| John Oharenko |
Chicago, IL - The nation reaches a milestone of one-third of the population vaccinated while financial markets hit new high records.
- Rising interest rates accompanied by tightened pricing and profit expectations prevail.
- Fewer new real estate projects come online due to pandemic uncertainty and increasing construction costs.
Other key real estate capital trends include:
Favorable
Financing Reemerges: Lenders see limited losses from the
pandemic, readjusting expectations of improving economic
conditions. As a result, even as interest rates rise, mortgage
spreads drop. Borrowers still capture desirable debt terms, staying
within the 3.5%-range for longer-term debt based on 65% or less
debt. Proven cash flow performance drives leverage and pricing
terms.
Prices Stubbornly High:Due to limited inventory, cap rates drift downward. Investors refuse to sell highly performing assets.
Buyers simultaneously chase down yields for the few investments listed on the market. As prime multifamily and industrial cap rates declined by as much as fifty basis points from last year, the feeding frenzy continues.
Furthermore, lodging assets recapture pricing with improving economic conditions.
Lastly, retail and office properties remain highly speculative as consumer shopping and workplace habits evolve.
John Oharenko of the Real Estate Capital Institute® notes, "Quick-flip profits based on shorter-term cycles rarely exist today, as more sophisticated investors scour markets for deal flow."
The
Real Estate Capital Institute® is a volunteer-based research organization that
tracks realty rates data for debt and equity yields.
CONTACT:
John Oharenko, Executive Director
john.oharenko@reci.com
director@reci.com / www.reci.com
The Real Estate Capital Institute®
Chicago,
Illinois USA 60622
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