Commercial real estate sector on the mend

It's becoming easier for investors to acquire capital.

It's a cautious recovery for the commercial real estate industry. While borrowing was up despite interest rates rising over the summer, a new report suggests industry executives are starting to see light at the end of the tunnel.

According to a recent survey from Cit Group, a leading provider of financing and advisory services to small businesses and middle-market companies, more than half of industry executives believe that the nation's commercial real estate market is in recovery mode, while 10 percent believe the recovery is very strong.

"Commercial real estate has been known to be a bellwether for the overall U.S. economy," said Matt Galligan, president of CIT Real Estate Finance. "As we enter 2014, we are seeing mixed views among middle market commercial real estate executives. The good news is we are definitely seeing renewed optimism and expectations for a more complete recovery down the road."

The report said that commercial real estate executives primarily consider the market as mixed, while 7 percent said it's flat and 5 percent consider it weak.

But on a brighter note, three out of 10 execs said their regional market activity was strong.

More people borrowing
The total volume of outstanding debt in the nation's commercial and multifamily sectors was up more than $17.3 billion during the first half of the year, according to the Federal Reserve. That brought the total volume of debt up to $3.1 trillion, which has surprised many industry insiders.

"It has been a terrific year in actual financing activity and rates are still compelling," said Ed Padilla, CEO of NorthMarq Capital. "We thought it would be extremely painful and slow for the market to look at a 100 basis point increase. But, in reality, the large majority of real estate investors still believe that if they can lock in a 10-year fixed rate starting with a four–that is still an asset that will ride along with their property for years to come." 

Although interest rates appear ready to climb in 2014, more people have access to funds, making it easier for them to acquire the capital they need for investments.

"If anyone tries to convince themselves that (interest rates) are not moving higher, they're fooling themselves," said Wesley Boatwright, Capital Markets Group's managing director.

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