By Lisa Y. Gordon, CPA
Real estate trends continue to show a robust recovery, but in markets that look very different from those of the pre-recession period. Commercial mortgage originations, for example, are seeing a slight increase from prior years, but the changes are incremental at best. In Deloitte’s 2015 Commercial Real Estate Outlook, they report 18.9% year over year growth in the 2nd Quarter of 2014. While lending certainly shows some opportunity, the real story is with alternative and innovative funding options that are gaining momentum.
Green bonds – “which are fixed-income instruments that tie bond proceeds to environment-friendly investments” (Deloitte 2015 CRE Outlook) – provide long-term, cost effective commercial debt for a host of sustainability efforts. Likewise, another trend that gets attention is crowdsourcing. Real estate is one of the industries leveraging this so-called “pooled capital” that supports a diverse portfolio of investors.
Given the current market, the proliferation of these new tools is noteworthy, but the question is, will they stand the test of time? We are seeing new commercial real estate firms enter the market to handle these transactions. 3 World Trade Center, a building of 2.5 million square feet of Class A office space in New York, is being secured with a 5% tax free return. All around the country, projects are being marketed in this new way.
The jury is still out on the longevity of these alternative financing mechanisms. But it’s nice to know that if you have a great project and it needs funding, this new model for raising capital is an option. The good news is that traditional financial markets are seeing incremental growth and steady recovery, and these new financing alternatives offer options and opportunities for all but the faint of heart. Deloitte’s report, “2015 Commercial Real Estate Industry Outlook,” provides a comprehensive outlook on technology, innovation and its forecast for the industry. It can found at the following link http://www2.deloitte.com/us/en/pages/real-estate/articles/2015-commercial-real-estate-outlook.html.
Lisa Y. Gordon, CPA is the incoming President and CEO of Atlanta Habitat for Humanity and former Vice President and COO of Atlanta BeltLine Inc. She is a member of CREW Atlanta who blogs about real estate, finances and public and private sector policy issues.
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