Research from some financial experts in the real estate industry indicates that commercial property pricing trends have stabilized and will likely to stay steady for at least six months to a year. Part of the reason for this phenomenon is that interest rates have ceased declining and have even risen. Since the economy continues to do well, the Federal Reserve is likely to raise the prime rate again by the end of 2018.
Lenders continue to supply plenty of debt for real estate acquisitions, and many believe that investors are still looking to inject a lot of capital into the commercial property sector. Among all commercial real estate sectors, office space is likely to be the least attractive due to capital expenditure requirements. The supply level of office space is also above the long-term average, so significant growth is unlikely.
In the industrial sector, there is enough demand for space to match the current development of new properties, but it’s not clear whether that trend will continue. Capitalization rates are highest for the retail and lodging sectors and lowest for student housing and office space. Yields on commercial real estate are very near the long-term average. Some investors are predicting that the next down turn in the real estate market may be near.
When an individual or company decides to invest in commercial real estate, it’s important to ensure that their financial rights and interests are protected. Purchase contracts and leases can involve very complicated documentation, and it’s the lawyer’s responsibility to carefully evaluate any paperwork involved in a transaction to mitigate any risks. Lawyers may also be able to help their clients negotiate more favorable terms.