2018 Commercial Real Estate Trends that can Effect your Business

The commercial real estate industry has never been described as steady and predictable.

Though there are long-term cycles that can be observed and anticipated, and there’s never a bad time to acquire more land, the art of buying and selling always involves some degree of risk.

But even that predictable sense of unpredictability is veering off into unknown territory due to new variables.  Between political shifts, economic shifts and other shifts yet to be determined, there are uncertainties but also potentially deals ahead.

Here are a couple of reasons why commercial real estate still has some surprises ahead.

• Foreign affairs. Dominating the news lately is new tariffs against foreign imports. Favorable countries are receiving exemptions, and less favor is being shown to less friendly economic partners. How will this affect commercial real estate? Some e larger U.S. and foreign banks do business in the U.S. and abroad. If tax rates or import-export balances change, these lending institutions could see fewer profits and more write-downs of tax credits. They may focus more on domestic lending or look for other ways to make up losses. 

• Interest rates. After several years of warning of corrections and the end of mostly steady rates, the Federal Reserve has begun to raise rates higher, something that might continue for another few quarters. New Fed Chief Jerome Powell has said fewer brakes are needed, and there’s little inflation risk now. Higher interest rates may mean that borrowers will need to borrow more and property values can increase. It also means that some buyers may hold off on buying something new and instead renovate their property. 

• Retail changes. As more purchasers go online, there’s less demand for traditional brick-and-mortar stores, especially national retailers. Toys R Us recently announced plans to liquidate, and other stores with strong histories are in dire straits, including Macy’s, Sears, and J.C. Penney. Along with being strong employers, these stores collectively had large footprints that may not be filled easily in their communities.  

People seeking financing for commercial real estate projects can contact Smart Capital Lending Group.

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