The commercial real estate world is almost certainly going to experience some major seismic shifts over the next few months and years, if early indications about the directions the Trump administration will take legislation and industry regulation hold true. It is, of course, impossible to know exactly how it will all shake out, but there is plenty of evidence to suggest that interest rates that have remained at near-rock-bottom for several years will probably begin to creep back upward. Furthermore, the very nature of commercial lending may be migrating its venue significantly.
For what seems like a geologic age, the Federal Reserve has been keeping rates quite low. It seems like every so often for the last several years, like a hedgehog predicting Spring, the institution has continued to affirm low rates. At the beginning of December 2016, however, the Fed confirmed that they would be raising interest rates by one-quarter of a percentage point.
The increase in interest rates, even in such a modest increment, could mean that large-scale projects become significantly more difficult to finance — and could also signal less competition among developers, as various parties must pick and choose their battles with a bit more care. The rise in rates may also fuel the migration of developers to non-traditional lenders. Through much of the back half of 2016, non-bank lenders made up for more than 10 percent of lending in a few major markets.
For those who are venturing into commercial real estate, the intricacies of the field can be overwhelming. Fortunately, you do not have to navigate this difficult season alone. The guidance of an experienced attorney can help you take stock of the changing playing field and ensure that you remain ahead of shifting legal issues.
Source: Forbes, "5 Commercial Real Estate Trends To Watch In 2017," Ely Razin, Dec. 22, 2016