X

Thank you for sharing!

Your article was successfully shared with the contacts you provided.

With the start of the new year, it is the start of the change in the euphoria of 2015 and prior in CRE values. The party ended. We are not going to have any crash, nor any serious defaults, but what we are going to experience is the classic ending of the cycle, and a slowdown in happy days of steadily rising values. As I have discussed in earlier rants, every cycle ends and it is simply how badly that happens, and what to do. Numerous of my friends in the business who I consider very smart and experienced, have been net sellers over the past several months. Prices, even in secondary markets have reached the point where people like me can’t justify chasing bids any longer. We lost four deals in 2015 to what we and even sellers brokers considered to be bids that simply were ridiculous. It proved to us once again that staying disciplined  is key to not being hurt in later years when the deal does not work as rates rise, rents top out, and capital sits on the sidelines waiting for the next downturn. Cap rise over time, interest rates rise as they have begun to do, and the economy stalls out. Now we even have preemptive steps by the regulators to make it very clear to all that there needs to be a material tightening of underwriting and a lowering of leverage, just as rates rise. That is a deadly combination for stalling out of rising values.

Want to continue reading?
Become a Free ALM Digital Reader.

Once you are an ALM digital member, you’ll receive:

  • Unlimited access to GlobeSt and other free ALM publications
  • Access to 15 years of GlobeSt archives
  • Your choice of GlobeSt digital newsletters and over 70 others from popular sister publications
  • 3 free articles* across the ALM subscription network every 30 days
  • Exclusive discounts on ALM events and publications

*May exclude premium content
Already have an account?

GlobeSt

Join GlobeSt

Don't miss crucial news and insights you need to make informed commercial real estate decisions. Join GlobeSt.com now!

  • Free unlimited access to GlobeSt.com's trusted and independent team of experts who provide commercial real estate owners, investors, developers, brokers and finance professionals with comprehensive coverage, analysis and best practices necessary to innovate and build business.
  • Exclusive discounts on ALM and GlobeSt events.
  • Access to other award-winning ALM websites including ThinkAdvisor.com and Law.com.

Already have an account? Sign In Now
Join GlobeSt

Copyright © 2020 ALM Media Properties, LLC. All Rights Reserved.