Commercial real estate affected by world events

On Behalf of | Oct 5, 2016 | commercial real estate

Economic and political trends around the world may hold clues for Florida commercial real estate investors and developers as to where the sector is headed. For example, an oversupply of oil means a volatile energy market. This is likely to affect commercial real estate pricing and property market fundamentals. While it has been difficult for economies in places that are reliant on the oil industry, such as North Dakota and Houston, in most of the country, lower gas prices may mean more disposable income.

A major factor is global and political instability including the Brexit vote in the United Kingdom. The United States is already an attractive commercial real estate market for foreign investors. In 2015, foreign purchases were over $87 billion, and many experts expect that number to go higher in 2017. Despite struggling economies in some places, such as China and Europe, capital is available from many other foreign investors.

Another factor is that interest rates are low and are expected to remain that way even if they show a slight increase before the end of the year. Similarly, cap rates are not expected to rise significantly. Slowing new supply will also affect the market. Most sectors are showing little growth while lenders are not eager to fund new construction.

With these trends in mind, both new and experienced commercial real estate investors may be looking to buy, sell or develop properties. They might want to consult an attorney if legal issues arise as well as for assistance in reviewing proposed agreements. An investor who is experienced in another area, such as multifamily housing, might want to move into another sector such as industrial property and be unfamiliar with some of the potential issues that might arise.