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Lack of good investment opportunities stagnating CRE market

On Behalf of | Feb 12, 2018 | Commercial Real Estate

Commercial real estate investors in Missouri might be encountering the same barriers that have put downward pressure on property prices nationwide. The last three quarters of 2017 produced small but consistent declines in prices. For January 2018, commercial properties demanded prices 0.3 percent lower than the previous month. Although large investors hold billions of dollars, they are encountering trouble finding properties to buy with a good potential to earn a profit.

A lecturer from the Harvard Graduate School of Design explained that a lack of appealing properties has prompted the drop in demand even when investors have money to spend. Stiff competition in primary markets has prompted investors to look for cash-producing property investments in secondary and tertiary markets. Although investors generally assign more risk to properties in smaller cities, they do have the potential to flip quickly and earn a profit.

According to survey results published in the Prequin’s 2018 Real Estate Spotlight, 65 percent of investors reported increased difficulty locating lucrative deals. They typically could not compete with the deep pockets of large investment firms that targeted the properties with the least risk.

Any person considering the purchase of commercial real estate must study the specific details of the regional market as well as the value of the property under consideration. An attorney may be able to aid with the due diligence by investigating zoning to determine the potential for commercial development on a piece of land. When a deal goes forward, an attorney may develop the contract language for the purchase agreement. This process might include negotiations that an attorney could manage. Contracts among multiple investors could also be written by an attorney. A legal analysis of the liabilities associated with the deal may help a person make an informed decision before participating in a high-value transaction.