Expected Changes in the Real Estate Industry: What Experts Are Predicting Will Shift by the End of 2017

ESTATENVY spoke with SVP at Blue Vista Capital Management Brandon Goetzman about Expectations for the Year Ahead.

From interest rate increases to changes in lending trends, the real estate industry continues to shift due to surrounding business and political environments. Especially during the first year of a new president’s term in the Oval Office, shifts are bound to happen. For Blue Vista Capital Management SVP Brandon Goetzman, who has experience with various property types of real estate including multifamily, industrial, retail, office, self-storage, senior living and student housing, it is clear that changes in the industry have an impact on his day-to-day professional life.

According to Goetzman, some of the most top-of-mind changes expected to take place in 2017 include increases in interest rates (an issue that began prior to the election), banks becoming more conservative with lending, a growing trend of ground-up condominium building construction and an increased desire for foreign investors to buy into commercial real estate in the U.S.

“We are beginning to see more and more ground up condominium projects over the past year or so versus the previous years,” Goetzman said. “Since the great recession, most of the new housing stock has come in the form of for-rent apartments. This is beginning to change as developers become more confident in the ability to sell new homes and condominiums as demand from homebuyers pick up. I suspect this trend will continue in 2017, especially as significant new apartment deliveries occur across the country. That will likely slow down apartment rent growth in a lot of markets across the country, including Chicago.”

Based on Blue Vista’s position as a Chicago-founded company, Goetzman was able to elaborate on market specific issues and provide valuable insight on today’s trends.

“Chicago is a very dynamic market, and is probably outshined only by some of the large coastal cities and select cities in Texas and the southeastern U.S.,” Goetzman said. “The biggest issues for Chicago remain the state of Illinois and city of Chicago fiscal situation—pensions in particular—and the potential impact those issues will have on property taxes as well as income taxes of both individuals and companies.”

Despite various challenges that ebb and flow in the real estate industry, Goetzman expressed an optimistic view on a couple of key elements that will lead to success in the coming years.

“Probably the more exciting opportunity is for the new government regime to implement new deregulation policies on the banking sector,” Goetzman said. “That will likely trickle down as more attractive financing options for commercial real estate borrowers. With that said, leverage is also the reason that the real estate sector gets into trouble every couple of economic cycles. So while this may be a benefit for the short-term, we need to be thoughtful about its impact long-term.”