California developers are likely aware that some smaller banks are cutting back on financing commercial real estate projects due to increased federal scrutiny. In particular, commercial property deals that involve construction or redevelopment and are in the range of $5 to $10 million are seeing less competition. As a result, more foreign banks are funding commercial real estate in the United States. Deutsche Bank and the Bank of China are among the banks providing the biggest loans. The commercial mortgage holdings of foreign banks' American offices increased more than 50 percent in 2015.
Overbuilding concerns in some CRE sectors
Construction of commercial real estate in California can be a good thing when there is a lot of demand for new units. However, too much building in a particular real estate sector can lead to oversupply. When a commercial real estate sector has more empty units than it has willing buyers and renters, the situation can be bad for the whole sector.
Popular CRE markets around the country
For many years, U.S. commercial real estate investors focused their interests on major cities like New York, Los Angeles and San Francisco, but the tides are starting to change. They are moving away from major cities and metropolitan locations in favor of mid-size cities like San Jose, Miami and Dallas.
Experts say equity REITs will thrive in new sector
Real estate investors in California and throughout the country may be poised for a change as equity real estate investment trusts are moving into a separate real estate sector rather than being lumped in with the financials sector. This move does not apply to mortgage REITs. Already a higher-risk investment, mortgage REITs may continue to be riskier than equity REITs in part because the latter will no longer be tied to the performance of the more volatile financials sector.
Factors affecting the banking industry since the 1950s
California residents no doubt would agree that the banking industry has drastically changed since the 1950s. While some of the changes are not good, others have greatly improved the way that banking is done.
Pokemon Go technology may be used in commercial real estate
Pokemon Go players in California are familiar with the augmented reality that is a significant part of game play, and experts in commercial real estate say that the technology may have an impact in their industry as well. It is expected that by 2025, virtual and augmented reality will be a $80 million market.
California CRE market could face significant changes
Some financial experts believe that developing conditions in the commercial real estate market might also prompt an evolution in lending practices. Small banks, which had played a major role in CRE financing, could soon face increased regulatory scrutiny amidst demands to make their underwriting standards more stringent.
Commercial lease terms are negotiable
It is common for California business owners to negotiate with property owners regarding the terms of their commercial leases. This practice is an expected one, and property owners are prepared to engage in negotiations in order to secure good tenants. The possibility of negotiation is likelier when the property is not in a prime location or when the market is weaker.
Online shopping seen as the cause of high retail vacancy rates
Robust demand in California cities like Los Angeles, San Diego and San Francisco has helped most segments of the commercial real estate market to recover virtually all of the losses caused by the 2008 financial crisis and ensuing years of recession, but many industry observers are becoming increasingly concerned about the persistently sluggish retail sector. Empty stores are a common sight in many of the country's shopping malls and arcades, and retail vacancy rates across the nation remain at a disconcertingly high 16 percent.
Coworking and other trends in office space
Purchasing and renting out office space is one way to invest in California commercial real estate. If investors are interested in generating this type of an income stream, they may want to do some research on the type of spaces that both local and national companies are looking for. These days, many businesses are interested in renting more than just spacious offices or large rooms full of cubicles.
