Federal Reserve Sees Clearer Skies Ahead for Commercial Real Estate

While most of the country experienced a rainy summer, the Federal Reserve sees clearing skies ahead for the commercial real estate market.

That was the view on a recent episode of the “Commercial Real Estate Show” radio program. Brian Bailey, a senior financial policy analyst for the Federal Reserve Bank of Atlanta, joined me to discuss banks, job creation and how Obamacare will affect commercial real estate.

Improving commercial real estate market

Commercial real estate is beginning to experience some real vibrancy, Bailey said. Vacancy rates continue to move down, even in hard-hit sectors like retail. The uptick in online sales has caused industrial vacancies to fall as online retailers add distribution centers to fulfill higher-than-ever demand, he added.

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Sustainable building practices are sexier!!!!

Sustainable building practices are sexier when they are announced with a new building, according to industry experts, than with an existing, newly retrofitted building. In fact, experts say it’s more exciting to include green features in the design and tout them in a new project press release than it is to find available maintenance capital, meet a long list of rules and measurements and then announce every few months that your building may save an extra 5 percent a year.

Thus, existing building owners have an uphill battle to climb: Green may make a tenant happy, but return on investment becomes a lot more important to investors, lenders and appraisers. However, since every new property today now generally meets at least the U.S. Green Building Council’s (USGBC) LEED Silver level, owners contemplating retrofits are feeling the pressure to go green.

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