As we approach the end of 2023, thoughts inevitably turn to the biggest impacts throughout the year.
In today’s economy, after years of relatively stable interest rates and appreciating property values, commercial real estate property owners and investors must now navigate higher and more unpredictable costs of capital in the current rising rate environment. However, as you prepare for 2024, let’s look back at the top six strategies that investors may still want to consider when looking at ways to save money.
Buy/sell, rent/lease residential &
commercials real estate properties.
1. 3 Multifamily Trends Commercial Real Estate Investors Should Monitor
Multifamily properties are still going strong in the commercial real estate (CRE) sector. But it’s not business as usual. Coming off record growth in 2021, the industry is recalibrating, which creates dynamic investment, valuation and risk environments for multifamily property investors.
Looking ahead, multifamily properties continue to offer appealing and profitable opportunities for commercial real estate investors. However, today’s evolving market can’t be predicted based on past performance. For investors, keeping a pulse on key demographic, economic and risk-related trends is more important than ever… read more
2. Enhanced 179D Provisions Create New Tax Savings Opportunities for Commercial Real Estate
As every commercial property owner knows, operational costs are often the make-or-break factor for property investment. Improving a building’s energy efficiency creates long-term savings that go straight to the bottom line. But the upgrades can be costly. Now, with the passage of the Inflation Reduction Act (IRA) in 2022, commercial real estate property owners and designers have additional incentives available when making energy-efficient improvements.
The updates to Section 179D, which went into effect for properties placed in service Jan. 1, 2023 or later, broaden both the eligibility definition and the deduction amounts. Here’s a look at the provisions — before and after the IRA… read more
3. Understanding the Consequences of Construction Inflation
Over the past four years, inflation, labor shortages and the increased cost of materials have resulted in historically high construction costs across the United States. These historically higher costs can have a significant impact on property insurance. When looking at your operations, construction inflation can have a number of negative consequences for property owners looking to insure their buildings… read more
4. How ESG Drives Value in Commercial Real Estate Investments
Environmental, social and governance (ESG) factors have become a common framework for assessing a commercial real estate (CRE) portfolio. Today, investors increasingly consider these elements to help identify risks and growth opportunities.
What’s behind the increase? While the concept has been around since the 1960s, ESG factors have rapidly gained momentum in CRE investing in recent years due to growing interest in sustainability among investors, property owners, landlords and tenants. The pandemic, natural disasters and social justice issues have propelled ESG into the mainstream. Looking ahead, ESG factors are expected to continue to drive value for real estate investors. ESG represents three key areas of sustainability — environmental, social and governance. In a rapidly changing world, applying ESG criteria helps investors create sustainable long-term value… read more
5. Best Practices for Reducing Insurance Risks & Managing Costs in Habitational Real Estate
Habitational multifamily real estate is an appealing investment because of its potential to create steady rental income and the increasing need for multifamily properties. According to research by the National Multifamily Housing Council, the U.S. needs to add 4.3 million apartments by 2035 to keep pace with the growing demand.
However, alongside the increasing need, property and casualty insurance premiums for habitational real estate properties continue to rise, creating a challenging risk environment for owners and investors. Average insurance costs are up 26% over 2022, with the increases in Southern and coastal states, such as California, Florida and Texas, trending even higher.
Here, Jeremy Perlman, Vice President of CBIZ Borden Perlman, shares insights on habitational real estate insurance trends, challenges and best practices… read more
6. 3 Ways Commercial Real Estate Borrowers Can Navigate High Interest Rate Hedging Costs
Today, real estate borrowers face significant increases — sometimes up to 10 times higher — in the costs of interest-rate caps required by lenders. With an estimated one-third of all commercial property debt in floating-rate loans, many property owners and investors have difficult financial choices to make when purchasing or refinancing properties.
For investors, higher hedging costs can quickly exceed the rental income being generated by a property. This is especially true when tenants are locked into long-term leases. As a result, property owners are exploring their financing options. At one extreme, if property owners don’t have the liquidity to absorb the higher costs of the required interest rate hedges, they may be forced to sell the property or reduce their investments in new properties. Before making that choice, there may be other financing options available, depending on the borrower’s appetite for risk and perceptions about where the market is heading… read more
These topics should remain top of mind for commercial real estate investors. As we approach 2024, our industry experts at CBIZ can help you evaluate your goals. Connect with a member of our team and gain access to more resources here.