Commercial real estate owners and developers in California and around the country are becoming more concerned about the consequences of climate change and how their buildings may be contributing to the problem according to a report released recently by the Urban Land Institute. Human activity releases billions of tons of carbon into the atmosphere each year, and experts say that about a third of these emissions come from buildings of one type or another.
Developers, investors and buyers who are involved in the commercial real estate market in California might want to be aware of the trends that are expected during 2018. It is important to understand where the market might be headed in order to reap the most profits and negotiate the best deals.
The availability of data analytics technology has the potential to transform the commercial real estate industry in California, but the industry has been famously slow to adopt it. Many CRE firms still rely on old methods of data-gathering and are reticent to share the information with others.
California residents may be seeing a Spirit Halloween store in their local malls in the near future. The chain operates mostly online throughout the year, having a physical presence only two months out of 12. Stores such as Spirit Halloween appeal to malls or other retail landlords with vacant space because national chains may take months to sign leases. Therefore, companies like these can fill space and create revenue in the interim.
Commercial real estate investors in California might find good opportunities beyond big cities. The chief economist from the National Association of Realtors said that investors have curtailed their activities around Class A assets. Smaller markets, however, have been presenting buyers with chances to buy properties with the potential for stable and consistent profits.
Before proceeding with the purchase of commercial real estate, California buyers should complete due diligence on the property to make certain that it is what has been represented to them and that it is worth the asking price. Conducting due diligence may take weeks or months. Sellers often want to negotiate shorter periods so that they can complete the transactions faster.
The value of commercial real estate varies greatly throughout California, and investors appear to be growing cautious according to the NREI/Marcus & Millichap Investor Sentiment Survey for the third quarter of 2017. A majority of respondents, 71 percent, believed that the price cycle for commercial properties had reached a peak.
With the 2028 Olympics coming to Los Angeles, the city is poised to increase its rank among world cities. Global cities are those cities that lead the way economically and culturally. Business and innovation boom in these centers. Already, Los Angeles has a thriving real estate market, and this will only increase the health of it.
Banks in California may not be required to obtain a certified appraisal to approve loans for commercial properties valued at or under $400,000 if a new rule is approved. Currently, financial institutions that provide loans must have a certified appraisal for properties valued at more than $250,000. This increase could make it easier for commercial real estate buyers to be approved for loans. Federal banking agencies came together to propose the rule change since it would alleviate some of the regulatory burden placed on them under the current rule.
Economic and political uncertainties are continuing to suppress commercial real estate values in California and around the country according to a growing number of industry experts. Commercial property prices dropped by 0.3 percent in June, and falls were observed in all five core property segments. The decline marks the second consecutive month that values on the online real estate company Ten-X's pricing index have fallen. However, commercial property prices remain near record highs and have more than doubled since 2010 according to Real Capital Analytics.