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Annapolis Real Estate Law Blog

Analysts say hotel market is bullish

According to real estate experts, the hospitality market is growing in Maryland and across the country. The upswing is driven by a stronger economy, demographic shifts, international demand and changes in consumers needs and expectations.

Improving corporate profits have translated into strong business group demand at hotels. Group bookings, which are defined as blocks of 10 or more rooms, currently make up one-third of hotel occupancy. This drives up the industry's revenue per available room, known as RevPAR. Industry forecasts expect 2015 occupancy rates to hit 64.9 percent, which is the highest since 1984. RevPAR is projected to jump approximately 7.4 percent.

Online-only real estate transactions

Maryland homeowners thinking of selling their homes without a real estate agent may have more options than in previous times. Online-only agents are a quickly growing trend in the U.K. market that could be coming to the United States. The National Association of Realtors advises against this practice, explaining that realtors have valuable local information and insights to offer homeowners. Since buying a home is a major financial decision, a National Association of Realtors spokesperson cautioned home buyers against making such a major decision online.

Real estate concerns aside, online-only real estate companies such as Tepilo, HouseSimple and eMoov have seen success overseas. Not only do the firms offer lower fees for selling homes and streamlined systems, they cut costs by a lack of retail presence a well. A traditional real estate transaction in the United Kingdom may result in significant fees that are 10 times higher than what an online-only agent would charge.

CEO believes real estate market is not in a bubble

People involved in the commercial real estate market in Maryland may have concerns that the rising prices indicate that the market might be headed for a bubble. One real estateprofessional, however, believes that there is no real risk, at least in the multi-family unit area.

The concerns about a commercial real estate bubble come as prices in major cities, such as New York, Los Angeles, Washington, D.C., Chicago and San Francisco, have continued to skyrocket in successive quarters. The CEO of the Peebles Corporation, however, believes there is no cause for alarm in the residential portion of the commercial market.

Securing capital for commercial real estate

As many commercial real estate developers in Maryland understand, the vagaries of the commercial real estate market means that they, unlike other types of entrepreneurial start-ups, must secure their funding in full prior to ever breaking ground on a new project. There are several things that developers should do when they are trying to attract investors for their project in order to make it likelier they will receive their needed capital.

One of the most important things real estate developers must do is to fully disclose everything and to remain very transparent. This means clearly outlining all of the potential risks in the package they put together to attract those investors who are interested in their project's risk level. Some investors prefer higher-risk projects, while others are looking for lower-risk investments. Disclosing the risks can help avoid being matched up with an investor who is inappropriate for the venture and avoid legal disputes later on.

Slower commercial property market could impact Maryland residents

As the real estate market enters its mature cycle, it could spell an end to earnings growth for commercial real estate companies. CBRE Group's stock declined by 14 percent in August 2015 with 7 percent of that coming in one day. In addition, HFF Inc. saw the value of its share decline by 20 percent in August 2015.

While it is true that broader indexes have declined in recent weeks, commercial real estate stocks have fallen further. For instance, the S&P 500 has seen a drop of 10 percent while real estate investment trusts have lost just 5.7 percent of their value. The 49 percent increase in new commercial real estate deals in the first quarter of 2015 compared to the same quarter in 2014 was largely attributable to several large transactions occurring at that time, and the increase in the second quarter was less than half that.

Market activity may affect real estate

As Maryland residents watch the volatile activity of the stock market, they may find that the swings affect their immediate plans for spending money in areas such as real estate. Many have predicted a coming correction in the stock market, but the actual drops that started in August may lead to worry for those who could face losses. Real estate is an area that can be affected both positively and negatively as the corrections play out.

One of the ways market volatility, especially drops, can affect real estate activity is that investors may seek out safer investments. Purchasing certain types of properties may provide a tangible asset that can later be sold or rented. Positive market activity often leads those with significant levels of wealth to invest in more expensive homes. As the market becomes less stable, this activity may drop off as homeowners keep more modest properties instead. The upper-end housing market could be negatively affected as a result.

Property investors may be contributing to troublesome price surge

Maryland investors may know that commercial real estate prices have been rising significantly. The investment-driven increases are cause enough for concern that the Wall Street Journal and some other news sources have even compared growth rates to the mid-2000s boom. The Federal Reserve also took note of the market rise in a July report to Congress.

According to Realty Today, the trends observed in cities such as New York, Los Angeles and Chicago are being replicated in foreign cities like Osaka, London, Berlin and Sydney. In the second quarter of 2015, commercial building sale assessments set records in terms of per-square-foot pricing.

Technology is changing commercial real estate

Those who want to buy or sell commercial real estate in Maryland would do well to take a lesson from the experts on how to use "big data" to make important assessments such as property value and price point. Real estate experts are using technology to supply instant information about important data, and this is changing the way that property is bought and sold.

Real estate agents, appraisers and others now use technology to assess property damage, check title facts and even to project improvements to commercial property. The use of technology means that big data is creating a transparency in the real estate industry that has already changed health care and other industries significantly.

Investor urges Macy's to consider REIT

Maryland investors may have read media reports about leading retailers taking advantage of their commercial property portfolios by forming real estate investment trusts. The investment firm Starboard Value urged Darden Restaurants to pursue this strategy in June, and the activist firm's CEO said during an investor conference on July 15 that Macy's could almost double its share price if it followed a similar path.

The Starboard CEO said that Macy's property portfolio was worth about $21 billion. He said that the retailer's flagship store in New York City was worth $4 billion and locations in Chicago and San Francisco would fetch over $1 billion on the open market. The company generated $28 billion in sales during its last fiscal year from more than 800 Macy's and Bloomingdale's stores around the country. The Ohio-based retailer said in a statement that it was considering a number of options concerning its commercial real estate holdings.

Avoiding common real estate myths

For many people in Maryland, the residential real estate market is something they only deal with only once or a few times in their lives. When people are in the process of selling or purchasing a home, it is understandable why they may believe certain myths about how the process works.

Many people think they should ask a price higher than what they believe they will receive. If they do this, though, they run the risk of receiving an offer that is lower than what they should or none at all. The reason for this is that most people will not look at homes they believe are above their price range. Secondly, if a home does not sell within the first few weeks, people tend to believe something is wrong with it and be leery of making an offer at all.