Missouri commercial real estate investors may want to know about a forecast that has been made by analysts at Morgan Stanley. The analysts are predicting that rather than increasing by 5 percent in 2016 as previously thought, the prices for commercial real estate are expected to experience zero growth this year instead.
Morgan Stanley made its forecast based upon the complex interplay between commercial lenders and property values. With a potential recession, it is possible that property values will fall. When that occurs, investors need to take steps to maintain their profits so they can make up for the lower loan-to-value ratios for their properties.
Contributing to the issue is the high financing cost many investors have for their real estate investments. Additionally, it may be more difficult to increase profits through attracting and keeping new tenants. Another factor is the fact that the Federal Reserve raised interest rates in December 2015, further impacting the financing costs for commercial real estate investments. The Morgan Stanley projections may have noted a difference between the quality levels of these types of properties.
People who are interested in investing in commercial property may want to seek the advice of experienced legal counsel when analyzing the market in which a property is located. Some markets may be stronger than others, making higher-quality properties a more reasonable choice. Once a particular target is identified, a real estate attorney can examine the title for potential defects and review the proposed purchase agreement and loan documents to see if there are any provisions that could prove to be troublesome.
