Commercial Real Estate News Wrap Up From Liberty SBF Oct 25 2016
Last week’s presidential debate brought up an important topic about owning commercial real estate – depreciation. Every year you are an owner of a commercial or residential property, you have the opportunity to deduct the depreciation from your income tax, which for Donald Trump is most likely a large amount. Furthermore, when combined with 1031 exchange rules, the tax laws favoring real estate have a large impact. The average firm in real estate development only pays just over 1% of income in taxes, while the average for all industries is almost 11% all together.
Although optimism may have been the theme of 2015 for capital markets, Phil Voorhees, an EVP for CBRE, claims that the theme for 2016 is uncertainty. Mr. Voorhees claims that the sentiment stems from the amount of macroeconomic impacting events recently happening – the US election, possible interest rate hikes, natural disaster, etc. However, on a better note, Mr. Voorhees states that, “It’s a record market for sellers, particularly of ‘A’ assets, and one of the best times for buyers taking advantage of modest leverage, record-low fixed-rate debt.”
Although U.S commercial real estate prices have reached new highs, the sector is a much safer place today that it was before the 2008 financial crisis according to Bloomberg. Although cap rates may have been falling, low borrowing costs and pressure from the Federal Reserve and government regulations have helped keep risky lending in check. Furthermore, bank construction and development loans are still 53% lower than their peak in 2008, with banks themselves lending against a smaller portion of property’s value today.
8 + 1 (That’s 9) Things You Need To Know About CRE Right Now!
- Billion-dollar question for multifamily developers Where will millennials raise families?
- Amazon plans for convenience stores and curbside pickup
- Why you shouldn’t be afraid of investing in affordable housing
- Fast casual restaurants must adapt real estate wise in order to continue their growth
- Lessons learned about outdoor amenities in multifamily communities
- Cap rates continue to narrow in the storage sector
- Are institutional players pulling out of the apartment market?
- Colorado Springs CRE continued to improve in the 3rd Quarter
- How the Jobs report and a year-end interest rate hike could affect CRE