Berkadia’s 2019 Mid-Year Powerhouse Poll reveals increased focus on affordable housing and data-driven investment decisions
Berkadia’s mortgage banking and investment sales professionals remain bullish on the commercial real estate market and turn their attention toward affordable housing as an emerging asset class, according to the firm’s 2019 Mid-Year Powerhouse Poll. The proprietary poll, conducted in June 2019, collected insights from over 120 of Berkadia’s investment sales brokers and mortgage bankers across 60 offices, to assess activity so far this year and where the commercial real estate industry is headed in the months ahead.
As conversations around the presidential primary election heat up, investment sales brokers and mortgage bankers are keeping their eye on interest rates and potential legislation from Washington. When asked what major trends impacting multifamily investing are on their radar for the rest of 2019, investment sales brokers pointed to interest rates (94 percent), debt underwriting (69 percent) and the political environment (40 percent) as their top three. For trends impacting multifamily financing, mortgage bankers ranked interest rates (97 percent), green financing (49 percent) and the political environment (46 percent) as the top contenders.
While 81 percent of mortgage bankers expect GSEs to be the primary lending source for the second half of the year, 80 percent of all respondents agree potential GSE reform will have a big impact on the way they do business this year.
“While we’re always keeping an eye on changes that could come from The Hill, we continue to be impressed with the amount of capital flow that’s gone into the commercial real estate market so far this year,” said Ernie Katai, Executive Vice President and Head of Production at Berkadia. “After sustaining four interest rate hikes last year, the industry is continuing full steam ahead and preparing to adjust for regulatory changes as they come.”
Despite regulatory uncertainties, including rent control, confidence in the industry remains following a strong first half of the year, during which deal volume across the industry met the expectations of nearly half of respondents (48 percent). One in four respondents even said deal volume exceeded their expectations so far in 2019 (25 percent). The momentum does not stop there—60 percent of respondents anticipate the amount of capital available for deals to remain the same throughout the rest of the year, and 29 percent expect capital on the table will increase.
Affordable Assets Pique Investor Interest
With single-family home prices and construction costs rising, affordable housing has jumped to the forefront of many commercial real estate conversations. Eighty-four percent of Berkadia professionals agree that affordable housing will have a major impact on the industry in the next year.
When asked what would improve the affordable housing crisis, respondents ranked modifying tax credit policy (84 percent), regulatory changes for the GSEs (70 percent) and local and state government intervention (69 percent) as the top potential solutions.
“The buzz around a growing need for affordable housing has been building for years but escalated this spring when The U.S. Department of the Treasury announced the second set of Opportunity Zone regulations,” said Katai. “As individuals and families in metros and suburbs across the country continue to struggle with rising rent costs, investors are no longer focused solely on Class A housing. Many are diversifying their portfolios by adding affordable properties to the mix. We expect tax incentives and other strategies that encourage the growth of this asset class to continue to evolve on a federal, state and local government level.”
CRE Technology Keeps Pace
Technology has permeated every industry, and over the past year investment sales brokers (89 percent) and mortgage bankers (83 percent) agree that its evolution has led to more streamlined processes across the CRE industry.
While new technologies emerge daily, Berkadia respondents rank big data (53 percent), artificial intelligence (19 percent) and the internet of things (12 percent) as the capabilities that will have the largest impact on CRE over the next five years.
“We’re constantly evaluating new technology and data capabilities to provide informed, actionable insights to investors,” added Katai. “The growth of big data across the industry has allowed investors to quickly become acquainted with new markets and their local economic drivers so that they can accurately predict a property’s potential risks and opportunities. We’ve seen both international and domestic investors use this data to expand their portfolios into markets they previously would have been reluctant to touch due to a lack of familiarity.”
About the Powerhouse Poll:
The 2019 Mid-Year Powerhouse Poll data was collected in an online survey conducted internally by Berkadia through SurveyMonkey in June 2019. The sample was based among Berkadia’s 60 offices throughout the U.S., consisting of 39 investment sales brokers and 87 mortgage bankers, totaling 126 overall respondents.
About Berkadia®:
Berkadia, a joint venture of Berkshire Hathaway and Jefferies Financial Group, is a leader in the commercial real estate industry, offering a robust suite of services to our multifamily and commercial property clients. Through our integrated mortgage banking, investment sales and servicing platform, Berkadia delivers comprehensive real estate solutions for the entire life cycle of our clients’ assets.
To learn more about Berkadia, please visit www.berkadia.com.
