Joe Taggart, senior vice president of the commercial real estate banking division with USAmeriBank, talked to GlobeSt.com about what buyers and developers should know.

MIAMI—“We're seeing a lot of construction of large apartment projects that will demand higher rental rates and will need to operate with low vacancy rates to be successful.”

GlobeSt.com caught up with Joe Taggart, senior vice president of the commercial real estate banking division with USAmeriBank, to get his insights in part two of this exclusive article. You can still read part one: Competition for Developer Loans Heats Up.

GlobeSt.com: What is the outlook for rates and other terms for commercial real estate loans?

Taggart: Regarding rates, I think that we'll see a gradual increase over the next few years. We saw strong demand for long-term fixed rates from customers earlier this year as treasury yields fell. Most customers are positioning for a rising rate environment. As for terms, we do see some lenders negotiating with guarantee requirements, although equity requirements seem to be stable.

GlobeSt.com: In terms of the market, what's your take on the multifamily sector?

Taggart: The economy in the Tampa Bay area and around Florida has rebounded, which has had a positive effect on commercial real estate. Multifamily has certainly heated up, especially on the higher end of the market.

We're seeing a lot of construction of large apartment projects that will demand higher rental rates and will need to operate with low vacancy rates to be successful. Complexes located in urban cores near retail and restaurants, which offer walkability, will probably fare better.

GlobeSt.com: Speaking of retail, what types of projects are you seeing there?

Taggart: We're seeing a lot of single-tenant, triple-net- lease deals for developers. Cap rates are low right now, so there is a lot of interest among developers.

We're seeing a limited amount of big shopping malls or multiple-tenant retail centers. However, we're seeing a lot of demand from big name tenants who have a national presence. These deals come to the bank already pre-leased, which are attractive for us because a good rule of thumb in banking is that you need enough pre-leasing to break even with the debt repayment costs related to the development.

MIAMI—“We're seeing a lot of construction of large apartment projects that will demand higher rental rates and will need to operate with low vacancy rates to be successful.”

GlobeSt.com: What is the outlook for rates and other terms for commercial real estate loans?

GlobeSt.com: In terms of the market, what's your take on the multifamily sector?

GlobeSt.com: Speaking of retail, what types of projects are you seeing there?

Taggart: We're seeing a lot of single-tenant, triple-net- lease deals for developers. Cap rates are low right now, so there is a lot of interest among developers.

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