Is It Time to Sell Yet?
A slowing economic growth is making lenders nervous and they are expected to become more selective and discriminating as the year progresses, according to Bloomberg. If financing becomes less available, the velocity of CRE sales will be affected as the year progresses.
Mark Myers, the head of the commercial real estate business at Wells Fargo & Co., was recently quoted saying “We’re getting late in the cycle. If the economy continues to grow ever so slowly, demand for commercial real estate will continue to grow ever so slowly. To the extent that the economic climate goes in the wrong direction, it’s going to have an impact on demand for commercial real estate.”
Bloomberg also reports credit for commercial-property owners was already contracting at the end of last year as banks reported tighter underwriting standards for property financing across the board.
Myers’ comments are not good news for property owners who may be planning on selling their assets few months from now. As banks become more cautious, it will become harder to secure acquisition financing. If that is the case, the pool of investors will be reduced to a small group of cash buyers. With less demand for CRE, property values will suffer.
To some property owners, it may be better to sell now, before the window of opportunity closes. Those who can wait, then, they should stand still until lenders regain confidence in the nation’s economic growth.
Read Bloomberg article here: www.bloomberg.com/news/articles/2016-03-15/loans-get-scarcer-for-u-s-developers-trying-to-finish-projects