Real estate cycles move in conjunction with many economic forces, including interest rate hikes. “During 2016, higher interest rates will signal changes in the commercial real estate cycle,” says 2016 CCIM Institute President Steven Moreira, CCIM, president and owner of SWM Capital Advisors in Longwood, Fla.
He expects interest rates to move up gradually, with several upward adjustments. Like dominoes, the interest rate spikes will cause capitalization rates to adjust as well, resulting in more property transactions.
“Even a modest change in interest rates will push borrowers off the fence and move sellers who were uncertain to list their properties,” Moreira says. “This will be good news for commercial real estate in general and CCIMs in particular.”
The 2016 presidential election will also affect commercial real estate - in particular, medical office space, according to Moreira. If a Democrat is elected, there will be improvements to the Affordable Care Act, he says. If a Republican wins, the health system may change completely.
He foresees the blistering pace of multifamily housing in downtown districts nationwide slowing down at the end of the five-year cycle and recommends watching the absorption rates for clues. If, at a later age, millennials ultimately conform to generational patterns by marrying, having children, and moving to the suburbs, the high-rise construction in downtowns will slow.
Regarding other properties, “The rise of creative office space nationwide is making a huge difference for converting antiquated industrial buildings into usable space,” Moreira says. He views retail as morphing from picking up goods into an experience that combines restaurants and entertainment.
By using STDB and their analytical training, CCIMs can navigate the coming changes in the commercial real estate markets. Because of their diversity across the industry, “CCIMs set the trends,” Moreira says. “CCIMs are not just brokers but also lenders, investors, developers, and institutional investors who participate in every part of the industry from Wall Street to Main Street.”