Because of concerns about overbuilding in big cities such as Chicago and New York, the commercial real estate market has slowed. The slowdown isn’t completely unexpected as it comes after six consecutive years of booming growth. Some investors in real estate are also concerned that the tax cuts that have been proposed by Trump will not pass. There are also concerns that higher spending and lower taxes may spark inflation, driving up interest rates. Chicago real estate lawyers track the commercial real estate market trends to be better able to advise clients about the timing of projects.
Dropping Real Estate Sales
Nationally, sales fell by 18 percent during the first quarter of 2017 when compared to the first quarter of 2016, according to Real Capital Analytics Inc. Investors are worried that commercial real estate prices may have already peaked, and they are currently taking more time before acting on deals. The decline in sales is more pronounced in New York City, where the first quarter results dropped by 58 percent in 2017 compared to the sales during the same time period of 2016.
Economic Concerns Prompt Investor Caution
Some investors are holding off because of concerns about the economic agenda that has been proposed by Trump, believing that it might not be implemented. With too many available spaces in some large cities, rental prices are falling, leading lenders to hold off on funding new projects. Some projects are still going through, however. Three companies, including EXP, Hickory Farms, and Caterpillar, have announced that they plan to move to Chicago’s downtown as an increasing number of millennials are simultaneously migrating into the city’s center.
Many factors interplay with each other to impact the commercial real estate market. It is important for developers and investors to consider market trends, the potential for interest rates to increase and potential tax changes before they engage in commercial real estate transactions. These projects may take several years to complete, so it is important to take a long-range view when forecasting how the property might perform. Conducting the proper due diligence is vital when preparing to invest in commercial real estate. If developers and investors do not adequately research a property’s history and forecast its potential, they may be left facing substantial losses that might take years to recover from. A Chicago real estate lawyer can help clients with research and market analyses so that they can make better-informed decisions.
