Minnesotans who either are thinking about selling commercial real estate or investing in it might be interested in learning about Morgan Stanley’s prediction for U.S. prices in 2016. According to the company, it believes that commercial real estate prices will stay flat, experiencing no growth at all this year.
Morgan Stanley analysts based their prediction on a relationship between the value of the properties and lender practices. When prices go down, commercial real estate investors need to offset those drops. The zero growth rate prediction stands in stark contrast to the 5 percent growth rate that the firm had earlier predicted.
It may not be as easy to increase profits for commercial real estate holdings with a possible recession looming. The problem may be compounded by loans with high financing rates. The Federal Reserve also raised interest rates in December 2015, meaning investors need to draw even more income on their properties in order to make the returns that they want. There might also be a difference between low-quality commercial properties and high-quality ones.
Commercial real estate property owners and potential investors may want to consult with their attorneys before engaging in any commercial real estate transactions in 2016. Legal counsel may be able to analyze a particular property and make recommendations regarding other possible options to keep profits and returns coming in at expected levels. If a person still wants to purchase a piece of commercial property, an attorney may help with completing the required due diligence, including a review of the proposed purchase agreement and financing documents.
This information is general in nature and should not be construed as tax or legal advice.