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Commercial real estate may not be as lucrative in 2016

On Behalf of | Jan 22, 2016 | Commercial Real Estate

If Kansas follows global trends, commercial real estate investors like landlords may not be able to sustain the high returns they experienced in 2015. Reports say that factors like the first interest rate increase by the Federal Reserve in almost a decade, stagnating growth in markets like China and lagging oil prices all stand to hamper the real estate market.

Observers say that 2015 may have marked the culmination of a 33-month growth trend that made history even as other investment vehicles, such as stocks and high-yield bonds, suffered value losses. Although many don’t directly blame the Federal Reserve for causing lower real estate values, few are confident that commercial property prices will continue increasing through 2016.

A few industry insiders continue to maintain that the market will remain healthy for some time. Others advise investors that they should sell their holdings promptly, and some major property conglomerates are increasing their purchasing and expansion activities in areas like the Midwest. One professor said that although it was uncharacteristic for commercial real estate to do so well, the trend could stabilize over the long term with property investment generating returns in ranges typically exhibited by stocks and bonds.

Negotiating commercial property development deals isn’t just about finding the right contractors. As developers and property owners seek funding, they have to satisfy the demands of investors and lenders, meaning that their ability to embark on specific projects is likely to depend on market trends. To increase the chances that their projects will gain the necessary approvals, owners and developers may find it helpful to actively pursue land use issues so that they can make the process go as smoothly as possible.