Commercial Investment Real Estate September/October 2017 | Page 13

for bankruptcy fill national news outlets and real estate publi- cations. Certainly not every retail sector is performing poorly, but there are headwinds across the sector. It looks likely the retail market will get worse before it gets better. In addition to the apparently adverse impact of inter- net retailing, the overall retail sector finally is facing up to years of significant overbuilding. In part this comes from municipalities’ willingness to greenlight projects with the expectation of filling their sales tax coffers, regardless of the economic demand. Overall, however, economic and demographic drivers are still propelling increased demand, though construction activity is catching up in some instances. And as inventory nears equilibrium, operating fundamentals are positive but moderating. Overall Stability On the capital markets side, conditions seem relatively unchanged since the end of 2016. Though still above long-term averages, transaction volume was down in Q1 2017 and looks to decrease more in Q2 2017. Anecdotal evidence suggests that brokers’ opinion of value requests is increasing, and that more commercial properties will Brand New Online Courses be offered to the market in the second half of 2017. But mar- ket uncertainties remain, such as interest rate hikes and global politics and policy, which could affect local markets. The amount of capital available and seeking investments continues to exceed the opportunities. Moderating fundamen- tals, however, appear to be neutralizing the impact on pricing, in addition to significantly smaller bid pools than those that existed in 2015 and early 2016. On the debt side, demand likely exceeds what lenders are willing to commit, particularly for noncore investments, and lenders’ cost of capital will likely increase this year along with the federal funds rate. While it is unclear whether the commercial real estate industry will experience further rate hikes this year, long-term upward momentum is exerting pressure on rates, which in turn leads to downward pressure on pricing. Of course, if the increase in interest rates is due to real growth of higher than 3 percent rise in GDP, most of this downward impact on pricing should be offset by increases in income. Marty Caverly is senior vice president of the resource income and opportunity REIT at Resource Real Estate in Philadelphia. Contact him at [email protected]. As a CCIM member, you have discounted access to these new training seminars taught by industry-leading instructors Commercial Loan Underwriting Financial Modeling for RE Development This course provides the models and analytics that allow lenders and investors facing underwriting decisions to remove uncertainty, quantify risk, and determine a project’s viability. Learn how to build several financial models using Excel that are valuable in analyzing a potential real estate development project. Calculating Building Size for Development Controlling the Deal Learn how to effectively estimate the potential building size for a given development site, including surface and structured parking scenarios. Learn how to use proven psychological and relational techniques to move up the value chain, build trust, and successfully manage every transaction. Success Strategies for Business Development in RE Develop a feasibility analysis for a unique business venture; create a mind map for concept development; assemble a team using personality evaluations; and build a three-year operating budget and business plan. Upcoming Courses Success Strategies for Business Development in RE Sep. 25 - Oct. 4 Financial Modeling for RE Development Oct. 10 Controlling the Deal Oct. 11 Visit CCIM.com/courses or call: [phone], opt 2 CCIM.COM September | October 2017 11