The Future of Commercial Real Estate

While extreme supply-demand imbalances continued to threaten real estate markets in many areas in the 2000s, real estate developers are inspired by the versatility of capital in today’s sophisticated finance markets. The disappearance of tax-shelter markets drained a substantial amount of capital from real estate and, in the short term, had a devastating effect on industry segments. However, most analysts believe that as investors, many of those motivated by the growth of real estate and the real estate finance industry were unprepared and unfit. In the long run, the industry will benefit from a return to real estate production based on the foundations of economics, real demand, and real income.If you’re looking for more tips, selling a home has it for you.

In the early 2000s, syndicated immovable ownership was introduced. Because many early investors have been affected by collapsing markets or changes in tax laws, the principle of syndication is currently being applied to more economically sound cash flow-return immovables. This return to sound economic practices will help ensure syndication continues to grow. Recent reappearance of real estate investment trusts ( REITs), which suffered heavily in the real estate recession of the mid-1980s, as an efficient vehicle for property ownership by the public. REITs will efficiently own and manage real estate, and raise equity for their purchase. The shares are easier to sell than other syndication partnership shares are. Consequently, the REIT is likely to provide a good vehicle to fulfill the need of the public to own real estate.

To understand the opportunities that will emerge in the 2000s, a final analysis of the factors that contributed to the problems of the 2000s is necessary. Cycles of real estate are important factors in the industry. The oversupply that exists in most types of products appears to constrain new product development, but it creates opportunities for the commercial banker.

The decade of the 2000’s experienced a real estate boom period. During the 1980s and early 2000s the normal flow of the real estate cycle where demand surpassed supply prevailed. At the time, office vacancy rates were below 5 per cent in most global markets. The construction sector, faced with real demand for office space and other forms of income land, was simultaneously witnessing an explosion of available resources. In the early years of the Reagan administration, financial institution deregulation expanded the availability of funds for the supply, and thrifts added their funds to an already increasing lenders’ system. Around the same time, the 1981 Economic Recovery and Tax Act (ERTA) gave investors enhanced tax “write-off” by accelerated depreciation, lowered taxes on capital gains to 20 percent, and allowed other profits to be shielded with “losses” from real estate. In short, more equity and debt funding became available for real estate investment than ever.