Berkadia: Interest Rates, Election Campaign Will Have Greatest Impact on Multifamily in 2020

Commercial real estate experts at Berkadia are bullish on the multifamily industry moving into 2020, according to findings from the 2020 Outlook Powerhouse Poll, which surveyed 150 of the firm’s investment sales brokers and mortgage bankers in December 2019 on their outlook for the year ahead.

Both investment sales brokers and mortgage bankers pointed to interest rates and the presidential election as having the greatest potential impact on multifamily investment and financing in 2020.

While 91 percent of mortgage bankers expect Government-Sponsored Enterprises (GSEs) such as Fannie Mae, Freddie Mac and HUD to be the most active financing providers in 2020. In a related question, 89 percent of all respondents agreed that ongoing discussions around GSE reform will have a major impact on the way the entities conduct business.

“With the presidential election in sight, we are closely monitoring new developments in Washington,” says 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.”

The top two subjects to watch this year are affordable housing and heightened institutional investment, according to respondents. Eighty-eight percent of those surveyed agreed that affordable housing will have a major impact on the way the industry operates in 2020. The top three potential solutions to the shortage of affordable housing offered by Berkadia professionals were modifying tax credit policy, local and state government intervention, and regulatory changes for GSEs. 

“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,” says 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.”

Eighty-five percent of the mortgage bankers and investments sales brokers surveyed believe that institutional investors will continue to show increased interest in commercial real estate investments this year. Further, 66 percent of respondents agreed that nontraditional commercial real estate investors like hedge funds, pension funds and  insurance companies will play a major role in addressing the affordable housing crisis. 

An overwhelming majority of respondents — 96 percent — agreed that technological advancements improved and streamlined processes within the industry in 2019. Berkadia professionals also weighed in on the top three ways technology will improve the commercial real estate industry over the next five years. Ninety percent of those surveyed believe the top improvement will be its role in data-informed investment decisions, followed by streamlining deal processes and valuation and cash flow reporting. 

“Technological developments implemented in commercial real estate have made processing transactions much quicker and afforded investors the data to make well-informed decisions,” says 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.”

— Katie Sloan

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