ATLANTA, GA (Sept. 24, 2012) – With continuing low interest
rates and increasingly available CMBS financing, the capital markets are more
accessible than they have been since 2007.
On the latest
episode of “America’s Commercial Real Estate Show,” a panel of experts shared
insights about the availability of capital in the future and gave an insightful
look at the myriad of forces driving this dynamic capital market.
Here’s a bit of good
news: capitalization (cap) rate compression is helping put some shovels in the
ground again.
Today’s cap rates
are driving a significant uptick in development in the multi-family sector as
it makes more economic sense for companies to develop rather than to buy,
explained Steven Marks (top right photo), managing
director at Fitch Ratings.
Many lenders are
still focused on value-add projects, but some construction loans are flowing.
“The market has
given us construction loan opportunities in multi-family, anchored retail or
single-tenant retail, some medical office buildings and maybe some
build-to-suit industrial,” said Christopher Sweitzer (top left photo), senior vice president and commercial real estate manager at
BB&T.
Another hot topic
for the capital markets is the Quantitative Easing Round 3 (QE3), which is
expected to cause a further decline in all-in interest rates and reduce the
cost of capital for borrowers. This third round of quantitative easing was
announced by the Federal Reserve Bank in mid-September.
The Fed pledged to
keep the federal funds rate at zero to .25 percent through mid-2015 and to buy
an additional $40 billion of agency mortgage-backed securities per month.
For the capital markets, this means Fannie Mae and Freddie
Mac are going to be viable sources of financing for multi-family developments
for the near future, said Tom Walsh (middle right photo),
senior vice president at Grandbridge Real Estate Capital LLC.
Meanwhile, these low
interest rates will encourage institutional investors to allocate more money
toward commercial real estate, explained Michael
Hartman (lower left photo), director of capital markets at the Reznick Group.
In addition, some
banks are taking baby steps toward easing underwriting standards on commercial
real estate loans after many years of very stringent guidelines.
“I think these loans
on commercial real estate today are probably going to be some of the safest
loans that we’ve seen in a long time,” said show host Michael Bull (lower right photo) founder of Bull Realty Inc.
Of course, there are
still some clouds looming on the horizon. These risks in the current market are
different because they are macro-level issues, explained Marks of Fitch
Ratings.
“In the past, we
were more concerned about property-level fundamentals or access to capital,”
Marks said. “Going forward our concern is more macro: What happens with the
economy? What happens with the European effort?”
The entire episode
on capital markets is available for download at
www.CREshow.com.
The next “America’s
Commercial Real Estate Show” will be available Sept. 27 and will focus on
retail tenant strategies.
Contact:
Stephen Ursery
Wilbert Public Relations
Office: (404) 965-5026
Cell: (404) 405-2354
