Market Conditions - Real Estate

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It seems like every time you read someone’s market prediction of late, it is ‘cautiously optimistic’ for the next year. When you get to year eight or nine in a commercial real estate cycle as we are now, even the most optimistic market commentators wonder how much gas is left to run this cycle. When the tide is lifting all boats, you don’t expect to see much litigation, even frivolous suits, as deals are happening in a robust up market and everyone seems happy. The environment for interest rates is all but confirmed for increases, and yet the cycle continues. Its durability doesn’t seem threatened by either a ready supply of equity or debt or even the possibility of oversupply. We have been noticing of late that ‘sectors’ are getting a deeper review by the insurance underwriters. Whereas in the past, the good results for insurance companies professional real estate risk was more uniform overall classes, we have seen that change more in the last 12 months. The ‘Amazon’ effect has put malls and strip shopping centers into a much greater focus and multifamily is also perceived to on its way to an oversupply issue. These two classes are seeing a higher level of scrutiny from the underwriting community.