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Uncertainty may be cooling the CRE market

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.

Industry analysts say that investors seeking solid and secure returns are turning to alternative assets like medical facilities and student housing, and projects in smaller markets such as Nashville and Atlanta are also gaining in popularity. Secondary and tertiary cities have been overlooked in recent years as developers focused their energies on major gateway markets, and this has sometimes led to severe supply shortages and fierce demand for space. However, many investors are still reluctant to act because of continuing doubts about the economy and the political climate in the nation's capital.

President Trump is yet to deliver on campaign promises to deregulate the financial sector, simplify the tax code and ease business oversight, and efforts to rebuild the country's infrastructure have garnered little support in Congress. Experts say that the impact of these anxieties on commercial property prices would be far more noticeable were it not for heavy investment activity in the Midwest.

Investors may also be deterred when properties are at the center of land use, zoning or environmental disputes or developers have been sued. Attorneys with experience in real estate litigation will likely be aware of this, and they may seek to prevent opportunities from slipping away from their clients by settling these matters amicably and expeditiously whenever possible.

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