April 13, 2023
InsuranceNewsNet
The commercial real estate market has been operating within a challenging environment: amid the backdrop of the COVID-induced remote working trend (which reduced occupancy and slashed demand), $1.5 trillion of U.S. commercial real estate debt is due for repayment in 2025 with fewer banks willing to refinance. Property valuations are also estimated to fall more than 40%.
The Federal Reserve’s rate increases are cited as one reason market values cannot be fairly assessed, which in turn discourages investors.
In an article appearing in the Property and Casualty News section of InsuranceNewsnet, Stroock Real Estate Partner Ankush Israni says: “[t]he Fed hasn’t yet stopped raising rates, which makes it hard to value what property should be. Sellers are still living in 2020, not willing to reduce their properties. Everyone wants to talk value, but it’s hard to determine value with people on the sidelines waiting for the Fed to stop raising rates. No one knows what the ceiling is so they can’t value properties effectively.”
He continues by explaining that unlike in other downturns, a lot of capital remains in the system waiting to be deployed and if the Fed stops raising interest rates, vacancy rates may improve: “[i]t will be interesting to see if it will be similar to Covid’s first six months. After restrictions lifted, the market was swamped and snapped back quickly. That may happen when inflation levels off. Until then, we still see transactions happen, just a lot slower.”
Click here to read the full article.
April 13, 2023
InsuranceNewsNet
The commercial real estate market has been operating within a challenging environment: amid the backdrop of the COVID-induced remote working trend (which reduced occupancy and slashed demand), $1.5 trillion of U.S. commercial real estate debt is due for repayment in 2025 with fewer banks willing to refinance. Property valuations are also estimated to fall more than 40%.
The Federal Reserve’s rate increases are cited as one reason market values cannot be fairly assessed, which in turn discourages investors.
In an article appearing in the Property and Casualty News section of InsuranceNewsnet, Stroock Real Estate Partner Ankush Israni says: “[t]he Fed hasn’t yet stopped raising rates, which makes it hard to value what property should be. Sellers are still living in 2020, not willing to reduce their properties. Everyone wants to talk value, but it’s hard to determine value with people on the sidelines waiting for the Fed to stop raising rates. No one knows what the ceiling is so they can’t value properties effectively.”
He continues by explaining that unlike in other downturns, a lot of capital remains in the system waiting to be deployed and if the Fed stops raising interest rates, vacancy rates may improve: “[i]t will be interesting to see if it will be similar to Covid’s first six months. After restrictions lifted, the market was swamped and snapped back quickly. That may happen when inflation levels off. Until then, we still see transactions happen, just a lot slower.”
Click here to read the full article.
