When in my
car, my car radio is fixed on Bloomberg Business. On one of the segments on Bloomberg this
morning, there was a discussion about “commercial real estate”, in particular,
activity in that market and funding available for projects.
As most
people are well aware, funding for commercial real estate projects – in
particular, funding for speculative development projects – froze up when the
Great Recession began. When developers
can’t get financing, or can’t get financing at reasonable interest rates, they
don’t develop. Plain and simple.
On this
morning’s Bloomberg show, the fellow being interviewed (who is, apparently, an
expert in the commercial real estate financing marketplace) said several
things:
- the number
of large lenders (dealing in commercial mortgage obligations) was at 37 at the
peak, before the Great Recession started.
That number dropped off significantly during the Great Recession, but,
now, is back up to 36.
- terms
available for commercial real estate development financing; today, around 4.5%
– 4.75%, ten years, non-recourse (no personal guarantee required). Interest rates have not (at least yet) been
affected by the Fed’s tapering.
When real estate developers can get
financing, and can get financing at low rates (which, apparently, is the case today and has been the case for
over a year by now), they will build. Historically, that was what drove
reprographer revenues onward and upward.
On a related
note, on one of Bloomberg’s segments yesterday morning, I listened to a
discussion about real estate development activity in the Miami, FL market. The guy being interviewed said that, once
again, you can see lots of cranes marking the skyline. Miami has long had a history of severe peaks
and pull-backs. Evidently, the real
estate development industry (planning, design, construction) is quite strong at
the current time. Just a few years back,
that activity ground to a halt.
What's going on in your market area, real-estate development wise?
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