Strong deal volume and increased use of technology also expected in the year ahead, according to Berkadia’s 2020 Outlook Powerhouse Poll
NEW YORK – January 16, 2020 – Mortgage banking and investment sales experts at Berkadia are bullish on industry activity in the year ahead, preparing for ways to effectively address the affordable housing crisis and the needs of nontraditional investors, according to the firm’s 2020 Outlook Powerhouse Poll. The proprietary poll, conducted in December 2019, collected insights from over 150 Berkadia investment sales brokers and mortgage bankers across 60 offices to assess expected commercial real estate activity and opportunities for the year ahead.
Investment sales brokers and mortgage bankers expect interest rates and the upcoming presidential election to have the greatest effect on multifamily investing and financing in 2020. When asked about what major trends impacting multifamily financing are on their radar this year, mortgage bankers pointed to interest rates (86 percent), the 2020 presidential election (44 percent) and GSE reform (41 percent) as their top three. For trends impacting multifamily investing, investment sales brokers ranked interest rates (77 percent), the 2020 presidential election (63 percent) and debt underwriting (40 percent) as the top three factors.
While 91 percent of mortgage bankers expect GSEs to see the most activity in 2020, 89 percent of all respondents agree ongoing discussions around GSE reform will have a big impact on the way they do business this year.
“With the presidential election in sight, we are closely monitoring new developments in Washington so we can continue to provide the best recommendations and offerings regardless of what happens on The Hill,” said Ernie Katai, Executive Vice President and Head of Production at Berkadia. “The continued uncertainty around GSE reform has paved a wide, prosperous road for institutional investors and other nontraditional lenders to enter our industry, creating overall strong deal volume and available capital throughout the market.”
Despite threats of a potential market slowdown on the horizon, investment sales brokers and mortgage bankers are confident that deal activity across the industry will remain strong. In fact, 92 percent of Berkadia professionals expect the capital available for deals in 2020 to increase or stay the same compared to 2019. Seventy-nine percent of survey respondents expect the number of transactions this year to increase or stay the same compared to last year, and 83 percent say the same about deal volume.
Trends to Watch: Affordable Housing and Institutional Investors
Across the country, the need for a remedy to address the affordable housing crisis remains. Eighty-eight percent of respondents agree that affordable housing will have a major impact on the way in which the CRE industry operates in the next year. Berkadia professionals rank the top three potential solutions to the affordable housing crisis as modifying tax credit policy (79 percent), local and state government intervention (63 percent) and regulatory changes for GSEs (62 percent).
“Opportunity zones were investors’ major focus early last year, but more recently, these tax benefit programs have led investors to deeper conversations around the affordable housing crisis,” said Katai. “This year, with potential changes at both local and national levels, we will see investors dive deeper and seek out affordable housing projects in order to help underserved communities across the country.”
As the industry remains strong, new entrants are beginning to diversify the real estate investments within their long-term portfolios. Eighty-five percent of respondents agree that institutional investors will show increased interest in commercial real estate investments in 2020. Further, 66 percent of mortgage bankers and investment sales brokers agree that nontraditional commercial real estate investors, such as insurance companies, pension funds or hedge funds, will play a major role in addressing the affordable housing crisis.
The Uptick in Technology Use
The commercial real estate industry continues to benefit from incremental integrations of technology within everyday processes. Nearly all (96 percent) of investment sales brokers and mortgage bankers agree that technology significantly improved and streamlined processes within the commercial real estate industry in 2019. Moreover, respondents agreed that the top three ways technology will improve the commercial real estate industry in the next five years are through data-informed investment decisions (90 percent), streamlining deal processes (76 percent) and valuation and cash flow reporting (60 percent).
This increased use of technology can be especially attributed to the developments made by start-up companies who are prioritizing industry efficiencies. Ninety-two percent of respondents agree technology start-ups will have significant impact on the CRE industry within the next five years.
“Technological developments implemented in commercial real estate to-date have made processing transactions much quicker and afforded investors the data to make well-informed decisions,” said Katai. “With the inherent complexity of commercial real estate transactions—from having dozens of stakeholders, to layers of financing, regulatory concerns and complicated valuation methods—we’re eager to see how technology and data-use across the industry continues to evolve to navigate these intricacies.”
About the Powerhouse Poll:
The 2020 Outlook Powerhouse Poll data was collected in an online survey conducted internally by Berkadia through SurveyMonkey in December 2019. The sample was based among Berkadia’s 60 offices throughout the U.S., consisting of 54 investment sales brokers and 96 mortgage bankers, totaling 150 overall respondents.