MIAMI—Challenges and opportunities are two constants in the commercial real estate sector. But where those challenges and opportunities are in any given season depends, in part, on who you ask. GlobeSt.com caught up with Randy Banchik, EVP of Los Angeles-based Westwood Financial Corp., to get his take on the matter in this exclusive interview.
GlobeSt.com: What are the biggest challenges we face this year?
Banchik: The biggest challenges for our business remain the uncertainty of the U.S. economy and global credit markets, and the overcompensation in pricing of A assets to pricing levels that are not likely sustainable when the cost of credit rises in the future.
GlobeSt.com: What is your view of the economy as it relates to commercial real estate? What do you predict is the pace and depth of recovery in 2013?
Banchik: Property fundamentals are stabilizing and new lease rates and fundamentals improve, however investors are not accounting for the natural drag in actual value recovery that continues as market conditions reset when owners with new basis bring distressed property back into the competitive mix.
GlobeSt.com: Are you more certain than we were last year? Still uncertain?
Banchik: We are more certain in that we think that we will experience fewer unexpected results on a property level. However, uncertainty still remains in credit markets and the potential domestic and global economic shocks.
GlobeSt.com: What are the biggest opportunities do you see in 2013?
Banchik: Buying quality in secondary and tertiary markets seems to create more value in our retail segment, and buying property at realistic cap rates where rents have been reset will provide good opportunities for long term value creation. Opportunities for short-term profit in stabilizing distressed properties through lease-up seem to be waning. This is also a great seller's market for the right properties, and an incredible time to acquire long-term financing, which we can see now might be short-lived based on recent flluctuation in rates.
GlobeSt.com: What factors are fueling those opportunities?
Banchik: Low interest rates and the return of more forgiving conduit financing is creating a stronger delta between an A property and solid B property in less in favor markets and properties.
Come back this afternoon for part two of our exclusive interview.
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