July 5th, 2011, By Dana Haugh
Predicting the future of commercial real estate sales transactions is a risky business for anyone, considering the market is only just starting to recover. In this delicate stage, one small factor could send us sliding back into a recession, but for those brave souls who are looking to shed a little light on the forecast for CRE, there are a few circumstances to consider—and Minyanville broke it down into seven key points:
Firstly, they advise us to remember that during the last two years, lenders have practiced the “delay and pray” procedure and are now being forced to ditch their NPLs and REOs in an effort to help the market recover. “These NPL and REO assets are joined by other CRE loan maturities to bring an estimated $900 billion of lender assets into play in 2011.” And these maturing loans have forced the hand on owners and lenders to become sellers in order to lessen the weight of NPLs and REOs. “Delay and pray” has pretty much been dismissed as capital requirements for lenders make it difficult to hold onto these burdensome assets. And according to Minyaville, many major banks have expressed no interest in harboring these REOs, prepared to sell and take the loss rather than cling to a sinking ship. It’s estimated in 2012 and 2013 that around $1.3 trillion in commercial real estate will have to be refinanced (that’s where we can help). A staggering figure, considering most of the properties are no longer worth the original finance plan’s calculation.
Based on these factors, they predict that CRE prices will stay relatively stable, supply and demand currently at balance with each other. So investors, invest! Remain cautiously optimistic and follow the economic trends religiously to ensure you are making the best decisions.
All information gathered from Minyaville
