Anyone interested in getting into the commercial real estate game needs to understand that emerging trends can have a major impact on your investing activities and the amount of success you enjoy (or don’t, as the case may be). Whether you’re a seasoned investor or you’re just getting into the act, here are five of the most important trends for 2019 that you need to watch.
It’s not just a new year, but the start of a new presidency. President Trump has already said that he plans to strip down Dodd-Frank and make major changes. Those changes will affect you, either for good or ill. There’s also the possibility that some specific banks will benefit more than others, and if that’s the case, there’s the potential for legal action. Again, this may have no effect on you, but it bears watching.
Less International Competition
It’s no secret that American investors have had to fight it out with international investors for prime real estate in many of the nation’s largest markets. That seems poised to change. In particular, Chinese investment may be lightening. If true, this means that you’ll face less competition, and possibly enjoy better pricing, but that remains to be seen.
Tying back into Trump’s drive to strip down Dodd-Frank, you may see fewer regulations in the investment world. The immediate upshot of this may be that you have an easier time securing financing for your real estate investments. With fewer regulations, banks are able to be freer with their capital, but this may also come with increased risk.
Higher Interest Rates
This one has been a long time coming (and it’s not quite here yet, so things might change), but the Fed is finally set to raise interest rates. They are expected to go up by a quarter of a point. This will affect several things, but most notably the interest rate you pay on commercial real estate loans, as well as lenders’ willingness to make loans in the first place. If they’re able to charge more interest, they may be more willing to take bigger risks. There is also concern about the larger national deficit increasing inflation, which may also have a big impact on interest rates.
Alternative Lending Solutions
Finally, there’s a shift away from traditional bank lending. Part of this is due to the ongoing repercussions of Brexit, which is making UK lenders unappealing options for financing, but also to the rise of non-bank lenders. Crowd sourced financing and groups like Blackstone are poised to make a big difference in the commercial real estate industry, so pay attention when choosing your options.
These are just a few of the trends that you’ll need to watch in 2017 if you’re considering or already involved with commercial real estate investing. While none of these trends has really changed the landscape just yet, they do have the potential to have significant impacts on any commercial investments, from individual investors to investment groups and everything in between.