CMBA Sentiment Bodes Well for Commercial Real Estate

(510) 962-9534jcoyne@grs-global.com

(510) 962-9534
jcoyne@grs-global.com

One of the commercial real estate conferences that annually serves as a benchmark for how the industry is performing is usually the CMBA Western States CREF Conference. As it does every year, GRS Group sent out a team of professionals to the show, and was a sponsor of this year’s event. Jeff Coyne, a business development director at GRS, was one of the firm’s professionals in attendance. By his account, the mood at the conference was a good sign for the direction in which the commercial real estate industry is headed.

How was the conference overall?

It was well attended, the best attendance I can remember since pre-2007. It was a very good conference in terms of the people who showed up, the varying firms (including a lot of new faces) and the expo hall was larger and more diversified than its been in years. These are just a few of the soft, non-deal specific and non-economic indicators that tell me that there is more confidence and that commercial real estate is doing better industry-wide.

So do you think based on that there is more overall optimism in the commercial real estate market?

Definitely. There is more optimism in the current market in terms of deal volume, property diversification and, again, a higher level of confidence in what’s going to come in the near term. Generally, people are just feeling a lot more confident; 2008 and 2009 were worrisome years, in 2010 things started getting far better. CRE mimics the trajectory we’ve been on with the overall U.S. economy. It’s been a steady ramp up, and things are getting better almost quarterly (barring Q1 this year and the Polar Vortex). In my discussions with clients, CRE firms are getting more and more comfortable.

Among the new faces you saw, were there different types of firms in attendance?

There was a larger hard money and bridge presence than there has been in the past. Those were the two that jumped out to me in the Expo Hall. The lenders that had always been there were still there and are as active as ever.

So is it a good sign that those groups are ramping up in the industry?

The bridge piece is a really good indicator because people are making the investment to take underperforming or mismanaged assets and reposition them to their highest and best use. If you’re investing in that kind of value-add proposition, you’re taking some risk that you are expecting CRE fundamentals to remain strong in the near term.  These repositions take both money and time until they can be refinanced or sold, so bridge money is as much a bet on the economy as the entity making the investment and their exit strategy. The hard-money presence is a bit different. Maybe you can’t get financing. Maybe you still owe more than what the property’s worth. Or maybe it just says that there are alternatives out there if your credit took a whack in the downturn. The more sources of capital the better for borrowers and our economy as a whole.

There was a session at the conference about how the industry is doing in the West. What was your takeaway?

The saltwater states, on the Pacific coast, are doing great in the major markets. Seattle, San Francisco and L.A. are obviously the leading markets, and they’re leading the way. Portland and Orange County are doing well. Colorado, especially Denver, is doing really well.  Although there are still many areas struggling, but nationally we’re relatively strong in CRE.  Almost all property types are doing better.

They changed the format of the conference a little bit this year. Tell us about that.

A lot more got covered. It used to be that you have an office panel and a multifamily panel lead by a lot of the same people. CMBA changed it up a lot this year. There was a single-tenant-financing session and a structured-loan-financing session.  There was construction-lending financing and a big multifamily panel to go along with many correspondent and lender meetings in separate rooms ringed around the main conference area. The program committee moved from macro topics to more niche topics this year, which was really a nice development.  With breakout sessions revolving around private capital, hard money, equity capital, construction lending, mezzanine finance and more there were multiple opportunities to sit in a very specific topic rather than a general session.  I enjoyed the format change.

Speaking of multifamily, is that slowing down at all?

No, it’s still cranking along. The overall tone seems to be that firms expect it to remain strong for a few years. The elephant-in-the-room question about what is going to happen with Fannie Mae and Freddie Mac did come up. Interestingly, the rep from Freddie Mac said that, internally, they are making preparations to be a private company in the next four to five years. I don’t see an imminent multifamily bubble unless we start overbuilding – which could occur in certain areas – but I feel like we’re years away from that. Housing is getting more expensive in most attractive CRE markets, and people have to live somewhere so apartments will continue to fill the need.

What was your message to your clients?

That as busy as we all are, GRS Group is still here and looking to help.  We co-hosted a fantastic cocktail reception with Opus Bank, and people are still very active and looking to GRS to help with their due diligence needs. I told my clients that although the due diligence industry seems to be constantly changing, we are staying on top of all the new developments so they don’t have to.  I reiterated to them that we are here to help with all their transactional due diligence needs. We can work on their PCA, Phase I and seismic reports. We can also help out with zoning, appraisal and survey. Lastly, I reminded them GRS Group has a wholly owned title agency (GRS | Title) that works with the largest firms in the industry. So from assessing the land and the building, to writing the title and closing the transaction – we can provide all they will need with a single phone call.

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