Up.
I believe in being to the point. The rest is puffery.
CEO of Magilla, Chris Meyer, sees no slowing down in commercial real estate in the next year. “In fact, I see a steady increase. That is what we are witnessing on our site, and we see an increased appetite for these types of loans from our lenders. Now, Magilla deals with premium borrowers, those with credit scores generally above 720, very favorable assets to liabilities ratios, and clean requests for loans so we may be more optimistic than most, but our metrics continue to see all positive for 2018.”
This would be consistent to what the tenor of the commercial real estate brokerage houses are indicating. “We believe, more than anything else, low interest rates will drive further investment.” While some would indicate that Janet Yellen and the Fed have their hearts set on raising interest rates, Magilla believes this will only last a few more quarters, at which time it will level off at rates that are still generationally low, comparatively speaking.
More importantly, we are seeing an almost insatiable appetite not only from foreign investment, but from ancillary equity partners (REITS, endowments, pension funds, life insurance companies) seeking a safe-haven and/or diversification from the mundane stock market returns of recent times. We see the losers are the smaller investors in local areas who are constantly being out-bid by these larger pools of money. We are, however, seeing some success from the micro, more nimble, investors, who have a better understanding of the local areas and can seek deals not commercial marketed by the large commercial brokerage houses. “Those who are pounding the pavement day-in-and-day-out, will always have success.” We spoke with a few small investors, those doing deals under five million dollars, who are still finding success, presumably because the larger money players are not competing for those deals.
The one major driving force is the Leviathan that is Amazon and how this is effectively centralizing the mall industry in America. While we see the need for malls and the desire for some purchasers to touch and feel the item they are going to buy, an overarching theme is for people to order three different sizes from Amazon and send it back if they don’t like it. While malls still provide entertainment and destination value for some people to see a movie and/or have dinner and meet friends, the retail component of the mall faces serious challenges that are very real. The other challenge that Amazon provides, especially in light of the recent purchase of Whole Foods, is how this will challenge the grocery store plans for expansion. We believe, particularly in the ordering of dry (non-perishable) items, Amazon will have a very real effect on certainly the grocery store chains, but also Costco and Sam’s Club (Have you ever tried to carry the 84 pack of toilet paper out of the store?).
The real question for the grocery world is how long will it be before a drone can deliver a warm meal to your doorstep at precisely 6PM?
As we said before…the commercial real estate market is “up” in 2018.
