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| Jeanne Peck |
CHICAGO, IL – Real Estate
Capital Institute reports the economy remains kind to real estate investment as
it continues to foster low mortgage rates.
Working against
low rates is the U.S.
economic outlook, which is improving as deflationary
concerns ease. Steadily climbing oil prices combined with
reduced fear of a
Chinese economic meltdown
gives the Fed enough ammunition to raise rates
again. In favor of low rates, the less-volatile
conduit market appears to
maintain pricing
(investment grade CMBS spreads back to mid-November) levels
but at a cost: meager
volume.
The net effect? Not much rate movement, only about a quarter
percent
increased during the
month. Investors pay attention to other
more pressing
issues such as:
* "High conviction" investing: Really focus on a very specific
investment strategy and
stay liquid to cover downside risk.
Investors are
pickier and rely on more
on long term vs. build-and-flip strategy; they are
prepared to own thru a
downturn.
* More fluid supply & demand
dynamics: Overbuilding, for example, is
less of an issue if
projects serve highly-targeted consumer needs such as
Transit Oriented, senior
living, Hispanic grocer.
* Black Swan: increased concern about the
higher frequency of events
beyond investor control
(terrorism, global instability). Cybersecurity
is
notable in the list of
such concerns as many fear moving too quickly into
the e-commerce
"unknown." For example, owners
experiment to find the
optimum mix of online and
bricks and mortar retail space to stay relevant in
addition to "experiential"
shopping.
* Lower returns: Healthier economic system governed by
stricter
regulations and less
consumer debt - allowing lower/safer overall returns.
Foreign and domestic
private investors flock to both debt and equity, more
flexible funds not hampered
by regulations or rigid yield thresholds.
* Affordability: Developers can't build enough workforce and
affordable rental housing
- a key focus with agency lenders and
communities
offering investors pricing
discounts, tax breaks, more density bonuses.
Jeanne Peck,
director of The Real Estate Capital Institute(r), warns, "The
ride is smooth now, but
keep your seatbelts fastened for some turbulence
ahead." She adds, "Low yields are acceptable, as
long as the domestic and
global economies stay in
sync."
For a complete copy of the company’s
news release, please contact:
Jeanne Peck
Executive Director
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