Chances of Commercial Real Estate is in Good Shape
Tuesday, February 07 2006 @ 09:44 am UTC
Contributed by: jron
As of press time the commercial real estate market has been showing strength, higher long-term interest rates has been a factor on slowing the rise of prices in residential real estate.
Lawrence Stewart, executive vice president and chief lending officer at Orangeburg-based Union State Bank, says "There's so much money looking for hard assets today," and added "There's a lot of money chasing these projects." His comments are base on his observations.
Reports said that commercial loans can even range in the million dollar point and at times not easily paid off. Investors and lenders in some area of the U.S. they are looking more on loans that make properties such as malls, office buildings etc.
Lisa Pendergast, a real estate analyst at RBS Greenwich Capital Markets in Greenwich, Conn. said "We are being more aggressive and the impact of that aggressive lending is unknown given that we don't know how quickly and to what extent rates will back up and how fast property values will decline,"
Commercial real estate loans interest extends to Wall Street reports say, loans there are resold as the security of investors which includes insurers, also pension funds and mutual funds, they turn into lenders as time progresses.
Larry Kay, director at Standard & Poor's says "definitely some credit concerns regarding the increased leverage we are seeing in loans," and adds "I don't think it will be a test in the near-term because of the abundance of capital and the current attractiveness of real estate as an investment, but longer term we do have credit concerns." They track securities pooling the property loans.
Data which was earlier compiled by Kay himself, shows that loans have so far weathered the rise in interest rates, mainly because cheap credit is the one many lenders are willing to offer.
Philip Luria, vice president of Austin Corporate Properties said that "the demand for commercial property is being dictated more by business expansion and less by relatively low interest rates," he adds "I'm not seeing rates going up that much,"
President of RPW Group, Robert P. Weisz, agreed on Luria, a 10-year Treasury note is a "no" for him, he doesn't expect that price.
Weisz said "At the same time, the office vacancy rate in some parts of Westchester is sharply lower in recent years," adding that "In downtown White Plains, the rate has dropped from 20 percent in the past three to four years to below 10 percent now,"
"A rising population and other factors in the northern suburbs are helping to drive demand for commercial projects." said Joe Simone, president of Simone Development Co. he added that "I think we're lucky to be in our area," also said "We've got a growing population, a very healthy community, good transportation and access. We have nothing but upside for the next couple of years."
The upside is there only the progress of time will be the basis whether the market would boom as expected by investors.