Cash Remains King - Spring 2016

Even as interest rates remain at historic lows and financing packages have gained luster in the years since the official end of the Great Recession, commercial real estate buyers are continuing to snub traditional lenders in favor of private equity or similar funds.

Increasingly, too, many buyers are foregoing debt altogether and paying cash for properties – mirroring a trend that has been a part of the area’s now four-year-old residential real estate recovery.

In Sarasota, cash deals have occurred recently for land tracts at Boulevard of the Arts and Coconut Avenue and at Coconut Avenue and 5th Street, in the city’s burgeoning Rosemary District.

This is a trend that will likely continue throughout 2016 and beyond, Harshman & Co. believes, the result of a growing belief among some lenders that commercial real estate, as a general investment class, may be becoming overheated. If that contention takes root, many banks and insurers may institute more onerous loan requirements for equity and loan coverage and scrutinize potential deals to a greater degree going forward this cycle.