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Commercial Real Estate Trends

In recent weeks, I have participated in national conventions for the CCIM Institute, the National Association of Realtors and the American Society of Farm Managers and Rural Appraisers. I have had numerous conversations about commercial, residential and farmland property trends. This is the first of three posts with my takeaways from these meetings.

Commercial Markets

  • Foreign investors from all over the world are still piling into U.S. real estate properties.
  • There is intense demand from foreign investors to use “EB-5 funds”* to purchase real estate.
  • There is some concern among lobbyists that the 1031 exchange may be under fire in the next Congress.
  • One broker told me she had sold two apartment complexes (one in Beverly Hills and the other in San Francisco) for a cap rate below 3 percent. The lowest cap rate I had ever heard of before that was 3.5 percent for apartments back in 2007.
  • There is still intense institutional competition for quality office and multifamily space in the dense urban areas of our biggest metros.
  • There’s little interest yet in suburban office and flex industrial space.
  • While construction has increased, absorption is still exceeding completions in most markets.
  • Amazon’s new business model is creating demand for warehouse space in many parts of the country.
  • Demand for manufacturing space has been muted as companies continue to automate their processes.
  • Mortgage money for commercial properties is getting cheaper and easier to come by as lenders get more aggressive to make deals happen.

*Congress created the fifth employment-based preference (EB-5) immigrant visa category in 1990 for qualified foreigners seeking to invest in a business that will benefit the U.S. economy and create or save at least ten full-time jobs.

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