It’s that time of year again. The Urban Land Institute and PricewaterhouseCoopers released their 2011 annual forecast, “Emerging Trends in Real Estate.” According to the forecast, Seattle ranks sixth overall in market quality for real estate investments, and reports the commercial real estate market to be showing small but positive signs of improvement. However, not all the news is good. In an effort to digest the extensive forecast and analyze what the forecast means for the Pacific Northwest from a market and legal perspective, a team from CB Richard Ellis’ Private Client Group (CBRE PCG) and attorneys from Lane Powell met to discuss the forecast. The following excerpts were taken from their conversation.
Non-recourse loans have seemingly disappeared—at least for debt under $10 million. Assuming this trend continues, how will it affect property values below $20 million?
CBRE PCG: The seeming disappearance of non-recourse debt, we believe, is a temporary aberration, which stems from too few lenders in the market. There are ample signs that more lenders are coming back to the market—after all, making loans is supposedly what they do. A major ‘driver’ in the return of non-recourse debt will be the re-emergence of commercial mortgage-backed securities (CMBS) loans as those are nearly all non-recourse. Some CMBS debt is now available, largely for core-type properties. However, as securitizations become more common, both loan size and property types will change bringing more debt opportunities to the market. Other lender types such as banks, life companies and others will, to a degree, have to follow suit to compete.
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