Fear and greed, the two opposing qualities that they are, can oftentimes be seen as key indicators of how the commercial real estate market is performing. In a market where greed is king, like the one of four years ago, investors are willing to take risks. There is more consumer confidence, meaning that more people want to buy commercial properties to lease to business owners. Many young market makers had gone years without confronting a major obstacle during their Metro South area real estate transactions.
Then there is the market that we have been in over the past few years, where fear takes over. Only the best of multi-family buildings and commercial properties have been purchased and the rest have been ignored. Consumer confidence has been down, and investors have been less willing to jump on a new property. Many commercial real estate properties are underwater in this kind of market. As a real estate agent in Boston’s Metro South area, however; I have seen some indications that greed is making a huge comeback.
Many industry analysts have concluded that the market has bottomed out and is making a slow, (some say painfully so) recovery. Here are some of the key factors that demonstrate positive change:
• Bidders and buyers are starting to, slowly but surely, put their capital at risk once again.
• Those who have distressed mortgages on their properties are starting to have more realistic expectations about what they can get on their foreclosed properties and mortgage loans. The debt financing servicers are also starting to relax their underwriting restrictions to accommodate the market.
• CMBS interest rates have dropped below 5%, and rate spreads have been tightening. This is typically a clear indicator that market confidence is on the rise.
• Assets are trading, capital is available for the right transactions and participants in the market are more willing to take risks, all of which point to signs of a real estate recovery.
While these are all great signs for the commercial real estate market in Boston’s Metro South area, there are still a few reasons to be a bit hesitant in today’s real estate climate. Many investors, buyers and sellers in the commercial real estate space will still face major obstacles throughout their transaction, such as distress and deleveraging. The property you’re interested in may also be the subject of a defaulted loan or a defaulted mezzanine loan. You may also have to deal with negotiating with multiple different factions within the same selling entity if the group doesn’t see eye to eye. These are the biggest obstacles today’s commercial real estate investors will have to face in their transactions.
As a whole, however; the culture of fear throughout the commercial real estate market in Boston’s Metro South area is starting to be shoved out by greed, and that is reason to celebrate. If you have any questions at all about commercial real estate properties in Boston’s Metro South area, don’t hesitate to contact me and ask. My familiarity with the state of the market allows me to guide my clients throughout the entire transaction seamlessly. I hope to hear from you soon!