A Disruption in Commercial Real Estate Finance Is Coming
Posted on Oct. 23, 2018
CCIM Institute’s analysis of last 50 years predicts CRE finance disruption in next 6-18 months
CCIM Institute Chief Economist K.C. Conway, in partnership with the Alabama Center for Real Estate at the University of Alabama, released a special report entitled “Commercial Real Estate Finance Disruption: Déjà Vu or Something New?” which identifies the sweeping changes taking place within CRE finance and their potential to cause the next major disruption in the industry.
According to the report, many of the systemic risks are re-emerging approximately one decade since our last major recession and real estate finance disruption -- aligning with history’s schedule of economic disruption every decade since the 1850s. But today, there are new variables at play to be aware of – possible game-changers.
“It is not a matter of when, but how,” says Conway. “We’re going to see a disruption in liquidity for commercial real estate lending as a result of accounting, regulatory, technological and financial product shake-ups – many of which are not on anyone’s radar.”
Looking through the lens of 50 years of financial disruptions, the white paper surveys a number of critical issues:
- What are the signs of the inevitable disruption in the next six to 18 months, including bank concentration risk and escalating interest rates?
- What new risks are presented by emerging property types like adaptive reuse, coworking facilities like WeWork, and experiential retail?
- How has commercial real estate evolved from an alternative investment to a mainstream asset deeply embedded in virtually every institutional and private investment structure, including retirement funds and pensions?
- Dramatic shifts in the transparency and speed of transactions, including advances in financial technology like Smart Finance, blockchain, and SALT.
- The effect of the sunsetting of Libor, the advent of CECL accounting standards for banks, and new lease accounting regulations for public companies that engage in any form of real estate finance activity.
“As K.C. so perfectly states in his report, ‘Knowledge – and adaptability – is power,’” says 2018 CCIM Institute President David P. Wilson, CCIM. “This take on the old adage not only speaks to the heart of CCIM Institute’s mission, but why the Commercial Real Estate Insights series was created to begin with. For commercial real estate professionals with the skills to analyze an asset and unlock value, the future that K.C. describes is full of opportunity.”
The full 4Q18 report can be downloaded for free at www.ccim.com/insights.
About CCIM Institute
CCIM Institute created the language of global real estate investment. Our courses and worldwide community deploy commercial real estate investment methodologies and tools that speed the pathway between opportunity, a go/no-go decision, and success for an asset, taught by instructors who are themselves industry leaders. Today, the organization, through its 50 chapters, continues to innovate best practices and elevate the commercial real estate professional through its core designation program to earn the CCIM pin - real estate's most coveted credential - and its topical education courses offered through the Ward Center for Real Estate Studies. In addition, membership in CCIM includes the industry's best technology and operational platform, allowing entrepreneurial and mid-sized businesses to compete with the largest multinational providers. Today, almost 70 percent of designees hold the title of owner, partner, principal, or president, representing an exclusive worldwide referral network of 13,000 members in 30 countries. Ultimately, CCIM represents a larger vision of the commercial real estate provider, leveraging investment analysis, opinions of value, and underwriting to become a leader in sourcing capital, building a cash-flow vehicle, and ultimately creating value. Information at
About the Alabama Center for Real Estate
Larry Guthrie | Director of Communications
The Alabama Center for Real Estate is housed within the University of Alabama’s Culverhouse College of Business. ACRE is organized to provide national thought leadership and relevant resources in the areas of research, education, and outreach that enhance Alabama’s real estate industry. The heart of ACRE is advancing relationships by providing servant leadership with a passionate, adaptable, and humble spirit. It was established by legislative act in 1996 with the support and guidance of its founding partners, the Alabama REALTORS®, the Alabama Real Estate Commission, and the University of Alabama. For more information, visit acre.culverhouse.ua.edu.
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