Chicago, IL, Jan. 3, 2014 – Real Estate Capital Institute
reports that as 2014 unfolds, markets awake to a newlong-term treasury
benchmark of three-percent-plus, a rate not seen in two years.
The yield level
has exceeded many analysts' expectations for 2013 - there may be room for some
volatility throughout the year. Many investors remain more bearish on
treasuries and corresponding low mortgage rates, expecting rates to rise 25 to
100 basis points throughout the year.
While treasuries
rates increased more than 100 basis points last year, funding
sources absorbed much of these increases by accepting lower mortgage spreads.
In the face of a rising rate environment, major realty capital markets trends
for 2014 year include:
* Mortgage rates approaching the historical norms of the past
decade
--- within 5.5% to 6% range for 10 year funds and about 4% for shorter-term
debt.
* More funds available for all levels of the capital stack for
property types. Investors are seeking joint venture, preferred equity and
other types of funding opportunities in search of more attractive yields.
* Investors are pulling back as multifamily properties reach
stratospheric pricing levels. Yet strong demand remains for housing in
general, as more investors instead move into the single-family sector.
* A steady course continues on lending formats as life companies
provide the best long-term debt pricing based upon lower leverage, banks tackle
markets with floating-rate loans and conduits pursue tertiary markets and more
structured transactions.
* As the economy continues to recover, new construction funds are
more available for retail, industrial and lodging properties, but becoming more
selective on multifamily ventures. In particular, commercial properties with
strong preleasing of 50% to 70% attract attention. Most construction
lenders want to see at least 25% equity based upon project costs.
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| Jeanne Peck |
* More competitive forward-delivery and pre-sale programs will
emerge as investors seek to capture new construction deals vs. tightly-priced,
existing project opportunities.
The Real Estate Capital Institute's director, Jeanne Peck, advises
"The 'action' in the capital markets is in the new construction
arena.
" Projects with proven sponsorship in infill locations attract
a feeding frenzy among banks; lifecos are designing ways to compete, with a few
offering new construction/ and perm programs.”
The Real Estate Capital Institute(r) is a volunteer-based research organization
that tracks realty rates data for debt and equity yields. The Institute
posts daily and historical benchmark rates including treasuries, bank prime and
LIBOR.
Furthermore, call the Real Estate Capital RateLine at
7RE-CAPITAL (773-227-4825) for daily rate updates.
The Real Estate Capital Institute(r)
3517 West Arthington Street
Chicago, IL USA 60624
Contact: Jeanne Peck, Executive Director
director@reci.com
