Seasoned real estate investors in Florida understand that studying the details of a property is as important as paying attention to macro-trends in the market. For those looking to enter the commercial real estate market, due diligence may seem like overkill at times, but intimate knowledge of a property is an important part of making a sound investment.
A combination of market forces and more conservative lending practices are making it more difficult for commercial property developers in Florida and around the country to refinance their loans, according to some industry experts. Developers planning new projects generally take out construction loans that must be refinanced after five to seven years, but insiders say that fears about a looming commercial real estate asset bubble and strict new regulations introduced by laws like the Dodd-Frank Wall Street Reform and Consumer Protection Act have made banks less willing to lend.
Consumers in Florida and around the country are doing more of their spending online, and many of the nation's biggest brick-and-mortar retailers are struggling to keep their doors open as a result. The commercial real estate market reflects the economy as a whole, and demand for warehouse space is strong while malls across the country are closing. A sluggish retail sector has not helped, and the Federal Reserve has taken action in recent months partly to curb real estate speculation.
Florida residents may not give commercial property much thought when it comes to becoming a landlord. However, buyers may actually be better served by investing in such properties. First, commercial property values tend to remain more stable over time when compared to stocks or similar investments. This is because both the building and the land that it sits on have value.
Commercial real estate sellers in Florida who assume they can rely on their buyers' real estate brokers or attorneys for help with their transactions may be better off hiring their own representation. While many lawyers that represent buyers in residential real estate transactions often assist sellers with various closing documents, it is more beneficial for sellers to hire their own attorneys that can help protect their best interests during each step of the selling process.
Advancements in technology are impacting how professionals in the commercial real estate industry do their jobs. Florida investors may benefit from leaning how process automation, smart cities and more are changing how commercial real estate business is done.
Commercial real estate investors in Florida and around the country can expect steady growth in the year ahead according to the National Association of Realtors. The trade association's first quarter outlook suggests that falling demand in larger cities was compensated for by increased activity in smaller markets during the fourth quarter of 2016. Economists expect the U.S. economy to grow by 2.4 percent in 2017, and the NAR believes that this will cause vacancy rates in most commercial property segments to decline.
Florida investors and developers can gain insights into how economic booms and busts influence commercial real estate by looking at the energy sector over the last few years. In June 2014, a barrel of oil demanded $107, and employment was high among energy industry workers in oil drilling and processing centers in the United States and Canada. Less than two years later in February 2016, oil had dropped to a 12-year low of $26 per barrel.
Florida real estate investors and developers should know that Federal Reserve officials are closely watching the prices of high-rise apartment buildings. Ten years after the housing market collapsed in the United States, this part of the commercial real estate sector has the potential of becoming the next asset-price bubble.
Most commercial real estate investors in Florida and around the country had a good year in 2016. A Mortgage Bankers Association report reveals that the financial sector provided more than $500 billion in commercial real estate loans in 2016, and both values and rents grew steadily in most markets. While the outlook for 2017 is generally positive among industry experts, an uncertain political landscape and a recent interest rate increase have raised some concerns.