Commercial real estate trends shaping the market in 2018

This new year holds much promise for commercial real estate investors, especially as the industry adjusts to new tax laws and rises above the economic and political uncertainty of the past couple of years. 

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One thing to pay attention to is whether interest rates will go up or not. This is highly dependent on the pace of inflation; Last December saw an unexpected increase, and rate hikes are most likely if that trend continues. But if inflation maintains its sluggish progression as was the case for most of the past year, the Federal Reserve would find it hard to justify any additional hike. The bottom line is if interest rates don’t go up, the cost of borrowing and the value of properties will remain stable. 

The latest U.S. tax changes will affect the stability of foreign lending in 2018. While these tax reforms do benefit businesses by allowing lower corporate taxes, they may have detrimental effects on commercial real estate lending locally and internationally. Large international companies like Citigroup and The Bank of America say that new tax laws have cost them billions of dollars in the final quarter of 2017. 

Add the fact that there is a changing economic climate in Europe as the U.K. and E.U. head toward talks on a post-Brexit trade deal in March. All in all, issues like interest rates, the ups and downs of the retail segment, and the impact of tax changes and Brexit on foreign lending playing a role in the commercial real estate industry in 2018. 

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Before establishing Terra Group, Pedro Martin practiced real estate law as a partner at Greenberg Traurig for 25 years. Through the years, he has been an influential figure in South Florida’s real estate industry. For more on Mr. Martin’s work and advocacies, visit this page.