5 Capital Market Themes To Keep An Eye On In 2017

The coming year in real estate debt and equity will be unlike any other. With a real estate executive as the incoming POTUS and The Fed raising interest rates for the first time since the previous cycle, there's a lot to keep your eye on. Capital market experts weighed in on which financing topics they're watching closely.

Investing Late In The Cycle

Finding good development sites is getting tougher this late in the game, Jackson-Shaw CFO John Stone says. But having more invested still isn't a huge priority for Banner Oak Capital Partners, according to its president, Geoff Osborn. Banner Oak looks for experienced ownership with or without their own capital. "We were a net seller in the last two years, but in 2017 80% to 90% of our investments will be in the preferred space," Rainier Cos principal Danny Lovell says. (It's worth noting that Rainier is a boutique firm specializing in preferred and common equity.)

Interest Rates

With the Fed raising interest rates and hinting at more to come, Danny thinks there will be a flight to quality assets. Those fully leased, institutional properties will look safer and safer, he says. Each asset class will be impacted differently. Geoff thinks the industrial space has a lot of room left to run, but multifamily markets need a more conservative approach.

Here's panel moderator Metropolitan Capital Advisors principal Sunny Sajnani with Geoff, Invesco managing director Ron Miller, John and Danny at Bisnow's Dallas Capital Markets event yesterday.

Tightening Construction Loans

Jackson-Shaw has somewhat of a formula figured out for construction loans. Banks like developers with proven track records and the loan procurement and closing process is taking two to four weeks longer. Terms are getting more conservative, decreasing LTC anywhere from 5% to 10%, John (here with Stream's Ryan Evanich) said.

Changing Political Environment

Like everyone else, economists will be watching Donald Trump's inauguration in January very closely. Even if Trump's plans to stimulate the economy don't come to full fruition, they'll still spur growth, Ron (here with Invesco's Joseph Tu) said. Trump's projections of 3.5% or 4% GDP growth are probably overly optimistic. Invesco economists think 2.5% is more accurate.

...Outside The US

Let's not forget that the US is still a massive source of incoming capital, Ron says. As the very messy divorce—Brexit, that is—ensues in the European Union, the Home of the Brave may capture a large wave of foreign capital that might otherwise go to the UK.