Commercial Investment Real Estate

SEP-OCT 2017

Commercial Investment Real Estate is the magazine of the CCIM Institute, the leading provider of commercial real estate education. CIRE covers market trends, current developments, and business strategies within the commercial real estate field.

Issue link: http://cire.epubxp.com/i/870737

Contents of this Issue

Navigation

Page 19 of 54

CCIM.COM September | October 2017 15 should benefit REITs in the long term. Strong economic fun- damentals historically trigger a positive chain of events for REITs — leading to increased rents and occupancy rates — which could offset the steeper price tag for debt. A positive impact for REITs is predicated upon whether the forecasted economic recovery is realized, however, and all eyes are on inflation, which is a key economic indicator. The U.S. core inflation rate increased to 1.7 percent this May, but remains at its lowest rate since mid-2015. As CNBC reported ahead of the most recent rate hike, how inflation evolves will be the X-factor for the market moving for- ward. Risks related to inflation increased among REITs this year as well, with 52 percent of REITs listing inflation as a concern, up from 42 percent in 2016. The combination of low inflation rates and rising interest rates is likely contributing to widespread uncertainty for REITs. Tightening capital markets could pose challenges for REITs this year. A silver lining exists for them; the sector has a large pool of capital stored away. In the first quarter of 2017, publicly listed REITs raised more than $23.1 billion in equity and debt. This was the most capital raised in any quarter since the second quarter of 2014, according to NAREIT. Once REITs adjust to the uptick in interest rates, competi- tion for assets at lucrative prices is likely to eclipse interest rates on REITs' risk radar. The Fed might be hitting the gas on rate increases right now, but its goal is to cruise in neutral. Stuart Eisenberg is an assurance partner and the national leader of BDO's Real Estate and Construction Practice. Contact him at seisenberg@bdo.com. REITs rely heavily on debt to finance their investments, and even a marginal increase in interest rates raises borrowing costs. Two lucky winners will each receive a $5,000 voucher for a dream vacation. You choose your destination, your itinerary, and your timetable. CCIM Institute members can enter to win by donating $100 or more, to the CCIM Foundation. Winners will be announced at the CCIM Fall Governance Meetings in Toronto, Oct. 14-18. You do not need to be present to win! Contact info@ccimef.org to get your donation form. Prizes sponsored by: Build Your Own Vacation Giveaway THE CCIM FOUNDATION'S MAJOR FUNDRAISER FOR 2017 Your donation will be tax deductible to the extent allowed by the law.The CCIM Foundation is a 501(c)(3) nonprofit organization.

Articles in this issue

Links on this page

Archives of this issue

view archives of Commercial Investment Real Estate - SEP-OCT 2017