Chicago, IL - September has been a quiet month as mortgage
spreads remain unchanged and lenders continue seeking high-quality funding
opportunities. All in all, overall longer-term mortgage rates moved about 20
basis points downward during the month.
 |
| Jeanne Peck |
In general terms, the most common commercial properties are
enjoying a
continued resurgence in demand by lenders and investors
based upon the
following highlights:
Multifamily - over the past five years the sharp
decline in homeownership
rate has propelled multifamily demand to record
heights. With homeownership
rates at about 65% for all households, nearly five million
more renters are
in the market. The
US Census Bureau shows more job creations in costly
dense urban areas, helping spur more demand for rental
housing. Lastly,
rising interest rates keep renters in place for longer terms
as recovering
housing prices prove too costly.
Office - downtown core office buildings are trading
for record prices, even
higher than the recession, as foreign investors and domestic
pension funds
compete for a scarcity of products. On the other hand,
suburban office
buildings are starting to show life, although rental rate
increases are far
out of reach, as expenses and real estate taxes escalate
faster than rents.
Industrial - the improving economy is directly
benefiting this sector, as more developers are starting to build "spec"
projects that are successfully leased upon completion. This sector enjoys steady growth as
newer space replaces obsolete industrial/warehouse facilities in many
markets.
Retail - "Urban infill" are the two words
to remember for retail. Tenants are learning to reconfigure space into tighter sites with
limited parking, in exchange for greater density and access to mass transit.
Grocery-anchored centers and Fortress malls are the most desirable
properties, also trading
at record-high premiums.
Property-type mortgage loan spreads: Mortgage spreads over 10-year treasury notes
are within a reasonably tight range for most types of Class-A
commercial properties.
Such spreads start at 175 basis points for office properties, varying about 15 basis points lower for
retail/industrial properties and as much as 20 basis points lower for
multifamily assets.
Jeanne Peck, the Director of the Real Estate Capital
Institute, advises "with tightening mortgage spreads between various
property types, lenders
continue scrambling for high quality assets in all
commercial property categories. The Great Recession created a pent-up demand for
core assets
which remains the biggest challenge for the real estate
capital markets to
solve."
Call the Real Estate Capital RateLine at 7RE-CAPITAL
(773-227-4825) for hourly rate updates.
For a complete copy of the company’s news release, please
contact:
Jeanne Peck
Executive Director
Real Estate Capital Institute
3517 West Arthington Street
Chicago, Illinois USA 60624
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