What is the biggest challenge you anticipate in 2019 as a direct lender or financialintermediary in commercial real estate?
I believe the obvious challenge is originating risk-averse transactions in a rising rate environment. Interest rates continue to cause values to compress not only in the Northeast, but also throughout the country. In addition, new luxury high-rise residential buildings continue to dominate the New York City skyline, but the underserved, affordable assets classes are not being developed for a rising population in the Northeast.
Where do you see the biggest opportunity for your company in 2019?
The biggest opportunity lies in the outskirts of major metropolitan hubs. Multiple asset classes, including specialty retail, industrial, and flex space will provide great opportunities for investment and lending over the next few years. Finding stabilized, owner-occupied investments that can withstand a correction presents both a challenge and an opportunity. Lastly, late stage and “busted” development projects provide a great opportunity to recapitalize those assets. Many construction starts occurred at the height of the economic boom. Several building permits were also issued during that period. As presales trend
downward, a late-stage opportunity may be an exit strategy.
What is your company’s lending strategy for 2019? Any new lines of business or opportunities you are pursuing?
Our company has served and will continue to serve the communities we have invested in the last 30 years. Opportunities exist in owner-occupied, stabilized projects that have room to grow and where the product is right. We look to continue to grow in specialty asset classes that have been battle-tested in tough times. In addition, our firm offers more than a lending platform. Our advisory team provides due diligence and asset management services to developers, financial institutions and private equity funds with a concentration on development, construction, bankruptcy, restructuring, and marketing.
What property sector of commercial real estate will experience the most activity in 2019, and why?
In 2019, I believe multifamily will continue to dominate. I think logistics centers and flex industrial spaces will generate plenty of investor interest based on their ability to yield a large upside. Although many may not want to admit it, some lenders will be cautious moving forward on approved land for development as market conditions continue to be speculative.