Most Important Future CRE Risk ?
Personally, I am reluctant to attempt to predict the future. That is for those with short memories and crystal balls. However, I will pass along what Dr. Calanog, an economist who gave info to the CCIM Institute. Investors may find it helpful.
What do experts see as the biggest risk for CRE? Well, there might be two sides of the coin. Spike in interest rates is the biggest risk. If growth rate is 4% and 2% is normal, and interest rate gradually goes up toe #.3% to 2023. But what if 10 yr Treasury hits 4% in 2 month? Cap rates will go down and then assets might be re=evaluated. Another risk, not talk about is inflation. Raising interest rates faster than planned is inflation. There is another possibility. Demand is strong, and supply is a problem. That equals higher prices. So then, maybe the Fed won’t raise rates.
We are not expecting hyperinflation, but such is very scary. The Fed will do whatever it can to avoid that, but any raising of rates will slow economic activity.
However, drilling down to various location, other factors may outweigh the national outlook. Austin’s growth is expected to continue. Valuations, rather than cap rates, seem to be what investors are considering. If you ask me more specific questions on specific properties and locations, an can be more specific. Again, not general national predictions, but specific property analysis is more my focus.