Commercial real estate financing outlook for 2017
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.
Analysts say that the U.S. Federal Reserve will likely raise interest rates again in the year ahead, but few expect the hike to be significant enough to have a serious impact on the commercial real estate market. However, fears that rates could keep rising may actually boost lending by prompting some borrowers to refinance their debt early. Industry figures show that about $400 billion in commercial property debt is scheduled to mature during the next 12 months.
Economic indicators are generally positive and many experts expect growth to continue as regulations are relaxed under the Trump administration. However, commercial mortgage-backed securities regulations that are part of the Dodd-Frank Wall Street Reform and Consumer Protection Act will go into effect in 2017, and several CMBS lenders are already taking a more conservative approach while others may leave the market entirely. This has experts worried as CMBS provide funding for a great number of high-leverage transactions and play a key role in the commercial lending market.
Choosing the wrong financing package can be disastrous for commercial real estate developers, and attorneys with experience in this area may advise them to be cautious and avoid making decisions too quickly. Lawyers could help developers in these situations by assessing the terms and conditions of real estate loans and pointing out provisions that may be problematic. Attorneys could also assist with legal matters such as zoning and land use issues to prevent projects from being ground to a halt.