As the country entered the uncertainty of 2023, valuations and the need for price discovery have become growing issues in commercial real estate. In some areas, valuations have been taking a large drop. Finance costs are a challenge, especially if plans originally had involved cheap interest rates and large degrees of leverage. Expectations of ongoing large rent increases have already run their course.

"We're moving from a 15-year artificially inflated environment of low interest rates and value inflation that the Fed created to keep the economy going and that real estate in particular benefited from," Eisner Advisory Group consultant Joseph Rubin told GlobeSt.com in the fall of 2022. "Now we're probably going to revert to the historical mean here."

With that much fog, it's no wonder that the question of what properties are worth seems to be coming up with lenders. KBRA thinks that appraisal reduction amounts (ARAs) in CMBS are a sign that needs attention.

Continue Reading for Free

Register and gain access to:

  • Breaking commercial real estate news and analysis, on-site and via our newsletters and custom alerts
  • Educational webcasts, white papers, and ebooks from industry thought leaders
  • Critical coverage of the property casualty insurance and financial advisory markets on our other ALM sites, PropertyCasualty360 and ThinkAdvisor
NOT FOR REPRINT

© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.