Commercial Rate Snapshot January 16 2023

Commercial Rate Snapshot 1-16-2023

These are the average available rates from eXp Commercial's Capital Partner CommLoan database of 700+ commercial lenders as of 1/16/2023 and are provided for comparison purposes only.

*Actual rates are dependent on property and sponsor.

[ux_image id="128169"]

Receive a Loan Quote from eXp Commercial's Capital Markets Partner CommLoan Thousands of Loan Programs. Hundreds of Lenders One Commercial Real Estate Lending Platform. One-stop shopping and unprecedented access to the capital markets

[sc name="financing"][/sc]

 

https://www.creconsult.net/market-trends/commercial-rate-snapshot-january-16-2023/

Should I Sell or Should I Hold? When is the best time for asset repositioning?

When it comes to selling their investment properties, clients typically ask me,’ Why should I sell?’ Great question. Why should you sell? The obvious answer is that you purchased the investment property as an investment, and it may not be doing as well as other investment opportunities, and after a while, you don’t realize the appreciation and thus maximization of profit from the property until you sell and acquire another investment property. So the question is really, ‘When should I sell? Clients really lose the perspective of the driving reason why they invested in an investment property in the first place. An investment property is just that; an investment. Treated as such, every investment must have a horizon and an exit strategy. If a property was purchased as an investment, then it makes full sense to profit as much as possible from the investment.

The real estate market, like any other market, will go through peaks and valleys. Trying to predict the exact moment of peak or the exact moment the market reaches the bottom is practically impossible. The real estate cycle has four phases; recovery, expansion, hyper supply, and recession. The complete real estate market cycle seems to have an average duration of about 18 years as there is good historical data to support that. So, where are we in that cycle now? How much more upside will we see before we reach the peak? The question really is, ‘What is your appetite for risk?’

Below is a chart of the real estate cycles dating back from the 1800s. The last real estate market crash started at 2006. We are almost 16 years into that cycle. Interest rates are still at all-time lows. Money is cheap, and the threat of inflation is very high. How long can government print money without paying the price down the road? How much road do we have left?

So when is a good time to exit an investment property? As with everything else, real estate is cyclical. Those of us that have been around for some time have witnessed several cycles in the real estate market. Since it is practically impossible to predict the peak of cycles, what strategy should you then use to maximize your investments? Keeping it simple, when evaluating if you should consider selling an investment property, it doesn’t really matter what the current real estate market is like. If you are looking to replace the investment property with another investment property, the ultimate decision to sell should also be based upon if you can increase your returns with the new replacement property, not what state the current market is in now.

There are a number of factors that can impact real estate prices; availability, investment potential, and interest rates, to name a few. Interest rates impact the price and demand of real estate—lower rates bring in more buyers due to the lower cost of money but also expand the demand for real estate, which can then drive up prices. As interests rate starts to inch up, the cost of money increases, and thus the appetite for real estate investments declines.

However, there are many ways that one can still protect their investments. 1031 Exchanges give investors a vehicle to reposition assets and mitigate risk. There are certain asset classes that inherently hold less risk and still perform as an investment vehicle. The questions really come down to; ‘How long do I hold on during this cycle? Do I have the time horizon to outlast another cycle? Is it time to reposition and take advantage of 1031?

As part of the team for our client’s investments, we specialize in building solutions around our client’s needs. We analyze the requirements, crunch the data, and present assets entirely based on their circumstances and the goals they are trying to achieve with their investment.

Have you thought of selling your property and would like to know what it’s worth? Request a valuation for your property below:

Request Valuation

 

Source: Should I Sell or Should I Hold? When is the best time for asset repositioning?

https://www.creconsult.net/market-trends/should-i-sell-or-should-i-hold-when-is-the-best-time-for-asset-repositioning/

2022 Commercial Real Estate Top Performers and 2023 Outlook

Despite the market’s uncertainty, commercial real estate performed well in 2022. With healthy balance sheets, consumer demand was significantly boosted in retail and industrial asset classes. In both sectors of the real estate market, vacancy rates fell even further than the previous year, illustrating strong demand for retail and industrial spaces in the post-pandemic period. Specifically, the retail sector experienced the most significant drop in vacancy rates to 4.2% at the end of 2022. Due to a lack of new supply, net absorption and rent price gains were substantial in the retail sector.

2023 Commercial Real Estate Outlook

However, this year will be challenging for most commercial real estate market sectors, with higher vacancy rates in the office and multifamily sectors.

After its recent record-breaking year in 2021, the multifamily sector has started to slow down in the second quarter of 2022. Demand remains solid, but net absorption dropped by 75 percentage points in 2022 compared to 2021. As a result, rent growth decelerated, and the vacancy rate increased in 2022. Due to rising borrowing costs, people may need to rent for a longer period keeping strong demand for apartment buildings. While the U.S. may skirt the recession, the multifamily sector will likely regain momentum later this year and perform better than pre-pandemic.

The future of office space is ambiguous. COVID-19 has already disrupted the “traditional office” work environment. Hybrid work is now a reality for many people, and this trend only goes one way, just like e-commerce changed the “traditional retail” sector. Thus, 2023 will be another challenging year for the office sector as this sector will continue to change to improve the occupant experience and attract more employees to return to the office. But, this may be even more difficult with older office spaces lacking modern amenities. Vacancy rates may drop even further for these office spaces.

Thanks to the rise of e-commerce during the pandemic, industrial real estate outperformed in the last couple of years. Big online retailers needed warehouses to store their products, boosting the demand for industrial spaces. Even though demand for industrial space cooled off in 2022, the industrial sector will continue to be one of the bright spots of commercial real estate in 2023. Despite the slowdown, vacancy rates will remain low, and rent growth will double due to low supply in the industrial sector.

The retail sector is expected to remain strong and perform better than pre-pandemic levels. With inflation moving down and interest rates to stabilize later this year, consumer spending power will be back this year. Specifically, growth in the brick-and-mortar stores will be driven mainly by smaller shops such as neighborhood centers. The trend is clear. Due to remote-work policies, neighborhood stores are on the rise, and this trend will continue this year. Consumers like to shop locally as these neighborhood stores offer convenience and personal interaction.

Hotel revenue dipped in 2020 due to the COVID-19 travel restrictions and self-quarantine orders, but it fully recovered in 2022. The revenue per available room (RevPAR) is 10 percent higher than the pre-pandemic level. After two years of social distancing and working from home, Americans travel again. With business and leisure time increasing, the demand for hospitality spaces will continue to grow in 2023. The year is still young.

Inflation, interest rates, supply chain, and geopolitical events are the main factors determining how commercial real estate will perform in the following months. The National Association of REALTORS® will keep you informed monthly about the developments in commercial real estate.

 

Source: 2022 Commercial Real Estate Top Performers and 2023 Outlook

https://www.creconsult.net/market-trends/2022-commercial-real-estate-top-performers-and-2023-outlook/

Partners

eXp Commercial Partners provide our clients with the best-in-class services needed to complete a streamlined, cost-effective, successful commercial real estate transaction and assist you throughout the ownership cycle, including Capital Markets, 1031 Exchange Intermediary, Cost Segregation, Property Tax and Title Services
https://www.creconsult.net/partners/

2023 eXp Commercial Commercial Real Estate Symposium

REGISTER TODAY

The Commercial Real Estate Symposium will provide junior and senior agents and brokers with valuable insights on topics, including: international opportunities, capital and funding for small businesses in today’s market, how to attract investors, and much more.

Dates: April 25-26, 2023
Start Time: 9 a.m. - 4 p.m. CST
Location: eXp Commercial Campus

We look forward to seeing you in the metaverse!

Important: Please download the virtual eXp Commercial Campus prior to the event, and follow the instructions to login and create your avatar. Feel free to explore the campus before the event begins.

 

+ Add to Google Calendar   + Add to iCalendar

 

Interested in Joining eXp Commercial as a Commercial Real Estate Agent?

Further Info

https://www.creconsult.net/market-trends/2023-exp-commercial-commercial-real-estate-symposium/

Kankakee Reduced

Price Reduced! 23 Unit Multifamily Offering
$949,000 to $875K! | 8.25% Cap Rate | 91.3% Occupancy
Broker: Randolph Taylor | 630.474.6441 | rtaylor@creconsult.net
https://bit.ly/3V3bzYh

2023 Demand for Apartment Buildings Will Remain Strong

Multifamily
Absorption of units in the last 12 months: 174,442
Rent growth in the last 12 months: 3.7%
Cap rate: 4.9%

Rent prices are still higher than they were a year ago, but the gains have returned to more normal levels. Rent growth dropped to the lowest level since the first quarter of 2021. Rents rose 3.7% year-over-year in the last quarter of the year compared to 5.6% and 9.2% in the previous two quarters.

As elevated prices continue to hurt consumers, fewer people can afford to cover their rent expenses, decreasing the demand for apartments. After reaching all-time lows in 2021, the vacancy rate rose significantly in Q4 2022 to 6.1%.

While rents have increased in nearly all the metro areas across the county, Sun Belt areas have experienced an even faster rent growth, including Kingsport and Knoxville in Tennessee, Fayetteville, NC, Charleston, SC, and Naples, FL.

Respectively, demand for apartment buildings remains strong in big city centers such as New York and Washington, DC. In these two areas, more than 9,000 multifamily units have been absorbed in the last 12 months ending in December.

2023 Outlook:

Rent price growth won’t likely hit the 2022’s highs. Although multifamily housing construction has slowed down, the number of apartment buildings under construction is at record highs. Thus, the completion of these homes may ease rent growth.

Nevertheless, demand for apartment buildings will remain strong, considering many buyers have already been priced out of the market. Due to rapidly rising mortgage rates, buyers need to earn more than $100,000 to afford to buy the median-priced home. However, only 15% of the renters earn that income.

Read the full report covering all commercial real estate sectors

Full Report

[ux_html] [/ux_html] https://www.creconsult.net/market-trends/2023-demand-for-apartment-buildings-will-remain-strong/