With the New Year now being here, everyone would like to know what the future will hold for us within commercial real estate in 2018. But while we don’t have the crystal ball, commercial real estate industry news resource GlobeSt.com recently sat down and interviewed Situs RERC President Ken Riggs on what we can expect in 2018, and here’s what he said…
After discussing this subject with many valuation experts in the industry, Ken concluded that “Eighty percent of those surveyed said CRE values would remain the same in 2018, while 20% predicted they will increase by 1%.”
This is good news for those wondering if there might be an economic downturn coming, but such a downturn is not something that is, generally speaking, on many people’s radar screens right now.
Property values seem to be firm, the economy has been doing good, and good financing continues to be available, all of which are good indicators of our future within commercial real estate.
However, there is one indicator that does deserve to be looked at, and this is the fact that in many areas commercial real estate prices have now stabilized and are not continuing to rise as they had been.
While on the surface some may respond to this by saying, “So what?”, in reality, when we look at what has happened in previous economic downturns, this price stabilization and seeing buyers no longer being willing to pay tomorrow’s price today has been an indication that a change is in progress…and that we’re more likely to experience a downturn at some point before we experience prices rising substantially once again.
Lenders seem to be confident right now in giving loans, and this is a very good sign. This is because when property can be purchased with both good leverages and at reasonable interest rates, this helps to support overall property values, as more people can still get good financing, keeping them in the market, and keeping them interested in buying more property.
So in putting all of this together, as we begin transitioning into 2018 a good term for us to be operating under could be “cautious optimism”. Keep looking for more opportunities, but always make wise, intelligent decisions based upon sound fundamentals