Magazine article Mortgage Banking

CRE Outlook: Continued Strong Demand

Magazine article Mortgage Banking

CRE Outlook: Continued Strong Demand

Article excerpt

NX People in the commercial real estate (CRE) industry should feel good about 2015--and they can look forward to continued strong demand in 2016, according to Jim Costello, senior vice president with Real Capital Analytics Inc. (RCA), New York.

Deal volume reached $534 billion in 2015. "That's a lot of activity and a lot of investor interest in the sector," Costello said at the Mortgage Bankers Association (MBA) Commercial Real Estate Finance/ Multifamily Housing Convention & Expo. He noted that individual asset sales reached $100 billion in the fourth quarter, and said this indicator never exceeded $80 billion even in 2006 and 2007.

"That indicates a broader base of investors driving the market," Costello said. "It's not just big portfolio deals driving up totals." Costello said he sees a lot of investor hunger for the yield that real estate delivers.

Victor Calanog, chief economist and senior vice president with Reis, New York, said industry fundamentals look steady.

"It's hard to point to any sector where you can identify a bubble that could take the economy down with it," Calanog said. "In retrospect, in 2006 through 2008, the housing market was big enough to do so--but right now I'm hard-pressed to say I'm worried about that as an economist."

Calanog reported hearing some anecdotal reports that developers have grown less bullish. "Most real estate recessions were supply-driven," he said. "Now we're hearing reports about lenders slowing down the money they are giving to developers. …

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