Todd Stofflet, managing partner at KIG CRE Todd Stofflet, managing partner at KIG CRE

MIAMI—It’s that time of the year again. Predictions are flooding in about commercial real estate in 2017. caught up with Todd Stofflet, managing partner at KIG CRE, to get some of his thoughts on year behind and the year ahead in part one of this exclusive interview. KIG is an institutional multifamily brokerage based in Chicago and operating throughout the Midwest. As for the Florida market, it’s already seeing a perfect storm. How would you define 2016 from an investor’s perspective? And how will that change in 2017?

Stofflet: 2016 was a strong year for multifamily. Investors were very bullish on acquisitions and we saw rental growth across the country. Value-add opportunities still seemed to be the preferred acquisition for most of the institutional capital as groups continue to search for higher yields.

We believe that 2017 will continue to be strong for multifamily. Our eyes will be focused on interest rates and the debt markets. It will also be interesting to see how foreign capital will respond to US real estate investments as a result of the election. There are signs that some institutional capital will start to be more conservative and look to stronger markets and core and core-plus acquisitions. What factors do you see influencing investor strategies?

Stofflet: I think investors will be looking at the debt markets and market strength as they consider opportunities. New construction pipelines and absorption will also play an important part in decisions next year. What are your predictions for the lending environment in 2017 and how will that impact commercial real estate investment strategies?

Stofflet: There’s no doubt that interest rates will start to increase in 2017. Debt for stabilized assets will continue to be readily available but new construction financing will be almost impossible for those without large balance sheets and strong relationships with their lenders. Do you expect any movement toward secondary and even tertiary markets? Why or why not?

Stofflet: We have already seen a big push into secondary and tertiary markets in the multifamily sector as groups search for yield due to cap rate compression over the past couple of years. If anything, we believe that institutional groups will start to focus their attention back on core markets.