Commercial Investment Real Estate May/June 2017 | Page 38

“There are so many moving parts right now that it is
going to keep a lot of people guessing on where we
think things will shake out this year.”
—Steven R. Reynolds, CCIM
In addition, the strong investor appetite to acquire quality
assets will help to sustain cap rates in some markets. “Buy-
ers, at least for now, are willing to absorb a slightly lower
return on equity, especially if they can acquire a quality
asset,” Reynolds says.
Usually, rates go along with some level of economic
growth or infl ation, and that means that most businesses
and properties are doing a little bit better, notes Jim Wilkie,
CCIM, a senior vice president at Seacoast Commerce Bank
in Magnolia, Texas. That being said, talk of higher inter-
est rates ahead has borrowers keenly focused on capital
costs and what that means for new investments. Borrowers
are more concerned about what the rate is, what their rate
options are, what the rate lock is, and how long they can
lock that rate prior to closing, he says.
Seacoast Commerce Bank is one of the top Small Business
Association real estate lenders in the country and is active
throughout the western half of the U.S. Wilkie is seeing
strong activity for all types of retail, medical, and industrial
properties in his region, which includes Houston and central
Texas. Few places in the commercial market lock a rate more
than about fi ve years, especially for small balance loans.
“I have not seen that quarter to half percent perceived
increase in rate slow anything down,” Wilkie says. “At some
level it will, but I have not seen that happening yet.”
Readily Available Capital
Overall, good liquidity from capital sources continues
across the board, including bank and nonbank lenders
such as life insurance companies, private equity funds, and
Fannie Mae and Freddie Mac. CMBS also has adapted to
new risk-retention rules that went into effect at the end of
2016 and is refi lling its pipeline.
The looming wall of maturities has continued to shrink.
While there may be some shake-out of lingering problem
loans, most borrowers are fi nding ample capital for acquisi-
tions and refi nancing.
The Mortgage Bankers Association is projecting a steady
pace of commercial and multifamily mortgage originations,
with a growth rate of 4 percent to $537 billion in 2017, fol-
lowed by another 2 percent increase in 2018 to $546 billion
in originations.
Yet there are signs that lending and underwriting is
tightening, notably on loans where lenders are concerned
Commercial Real Estate Investment Transactions
Americas
Europe, the Middle East, and Africa
Asia Pacifi c
Transactions (US $ Billions)
Rolling Total (US $ Billions)
$300
$1,000
250
800
200
600
Rolling 12 month total
150
400
100
200
50
0
0
Q1 — Q4 Q1 — Q4 Q1 — Q4 Q1 — Q4 Q1 — Q4 Q1 — Q4 Q1 — Q4 Q1 — Q4 Q1 — Q4 Q1 — Q4
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Source: CBRE Research Q4 2016, Real Capital Analytics
Note: Investment volumes can be measured with or without entity level transactions with equal validity. In this report, Real Capital Analytics and
CBRE include entity-level transactions.
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May | June 2017
COMMERCIAL INVESTMENT REAL ESTATE