Due to a combination of factors, including climbing interest rates, buyers are less inclined to purchase industrial properties. Here’s what it means for owners and how SoCal CRE Team can help.
Causes and Effects
Needless to say, having fewer buyers on the market for industrial properties impacts the strategy and outlook of owners.
Let’s take a closer look at the causes and effects of the current shrinkage of the industrial buyer pool.
The most obvious consequence is that when supply exceeds demand, we are looking at a market that favors buyers. The reason is that fewer buyers translate into less competition for properties, which makes it harder to meet the pricing expectations of owners.
The main factor behind this phenomenon is an increase in interest rates. Last Wednesday, the Federal Reserve raised benchmark interest rates three-quarters of a percentage point, a move designed to curb inflation. This is the Fed’s most aggressive increase since 1994.
What Does It Mean for Property Owners?
The higher the interest rates, the harder it is for buyers to get financing. This, in turn, means that owners will have to wait longer to get their money out of the property.
Being on the market longer requires patience on the part of owners. Not only will it be harder to find buyers, but owners will also have to deal with the uncertainty that a buyer may not able to complete escrow.
Most importantly, a shrinking pool of industrial buyers means that owners will have to readjust their value expectations. As more properties become available, competition increases, which may cause prices to drop even further.
How SoCal CRE Team Can Help
As you can see, industrial property owners face a challenging landscape in the short to medium term.
The good news is that SoCal CRE Team can help industrial property owners navigate the headwinds of the current market conditions.
Thanks to our in-depth understanding of the Southern California market, we can bring all-cash buyers who aren’t concerned by financing issues (i.e. appraisals, unfavorable financing terms, delays) and willing to pay top dollar for your property.
This way, we increase the probability of closing, and help owners of industrial properties get their money quickly without having to dramatically adjust their value expectations.
Disclaimer: This material is for general information and educational purposes only. It is not guaranteed as to accuracy, does not purport to be complete and is not intended to be used as a primary basis for investment decisions.
About SoCal CRE Team
At SoCal CRE Team, we specialize in finding commercial real estate solutions in Southern California for developers, investors, landlords, and tenants.
If you are interested in a free commercial real estate evaluation or have a commercial real estate inquiry, contact us today by telephone (714) 456-0500 or email gary@ashwillassociates.com. We’ll be happy to offer guidance and answer all your questions.
