BPM's Real Estate Insights 2019 Volume 01 | Page 13

to live there. The biggest impact on bottom line for those projects will be vacancy and turnover. It is attractive from a nominal price-point in any city where a one bedroom is over $3,500 monthly, such as Oakland and San Francisco. Are lenders more willing to lend only to certain property types (i.e., industrial, office, etc.)? The most risk adverse lenders are still focused on multifamily primarily, however, some even feel multifamily is a bit frothy and have started pulling back slightly. Other popular property types include industrial, as it is benefited by continued growth of online commerce/Amazon, as well as self-storage. Even quality manufactured housing is a sought after product type. It is more difficult to finance ground up construction across the board, just in terms of getting the deals to pencil—specifically, condominium development in secondary markets. With the rising construction costs, even getting the deal to pencil in downtown San Francisco and Oakland is difficult. not going to be as aggressive with their proformas. Where we are in the cycle, in general, will be a big issue. Obviously, if we do see interest rates creep up, that will have a slowdown effect as well. What keeps me up at night is some kind of black swan event, like a massive earthquake or geo-political threat, which could have unknown effects and shock the markets. It’s nothing new, but when the market is this frothy, it could have a more drastic effect. Overall, are you optimistic or pessimistic for real estate in the next 1-2 years? What goes up must come down. I’m optimistic for the next 12 months, after that I am on the fence. There's still some runway. Not to sound too negative, but I tend to think that whatever correction happens will happen quicker than most would think. Any correction will be steeper in secondary markets, with more of a plateau in gateway markets. n Helen Moulis is a Tax Director at BPM. Contact Helen at [email protected] or 925-296-1092. What are the top biggest challenges facing the industry this coming year? Where we are in the market cycle is going to increasingly dictate the actions of both lenders and investors as they become more focused on the potential downside. They are BPM Real Estate Insights 13