Wednesday, April 2, 2014

Funding for commercial real estate projects has increased dramatically

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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