Gary Meltzer: Where are we now, where are we headed and where are the opportunities?

The current commercial real estate market is generally strong from both a pricing and rental perspective. Although transactions are not in abundance, prices are relatively strong for a number of reasons. Meaningful returns on cash reserves are all but non-existent, making real estate a desired alternative to holding cash, increasing demand. Although commercial tenants have had difficulty paying rents, and cash flows to owners/borrowers have in many cases not supported their debt service payments, lenders have been hesitant to prosecute and conclude foreclosure proceedings. If lenders were taking back properties, it would oversupply and depress the market, as sales prices would be lower because lenders traditionally seek quick exits from ownership and price foreclosures to move. Lenders are lending more money than they have of late, facilitating transaction activity. While lenders are requiring more money down, many buyers are willing to invest greater amounts of cash because their cash is earning very little elsewhere. Business owners are hiring, which has led to tenants signing new leases or lease extensions. This has led to an increase in rents. Prices will stay relatively strong as optimistic businesses owners fuel office and retail demand. Gary Meltzer, Esq., is a partner at Meltzer, Lippe, Goldstein & Breitstone, LLP