The one component of commercial real estate that appears to be on solid footing and expanding is the industrial sector. Average rents have increased while vacancy rates remain low, according to CommercialEdge.
However not even industrial can escape the current volatility in the capital markets and the effects it is having on valuations.
"Given the rise in mortgage rates and the tightening of underwriting standards enacted by banks in recent quarters, many properties refinanced today could net 20% to 30% lower profits than they did at origination," the report cautioned. On the other hand, it notes that "many industrial loans coming up for refinance will have the benefit of increased revenue during loan seasoning."
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