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2016 marked for commercial real estate stagnation

If Morgan Stanley analysts are right, some Maryland investors may be hindered by a year of flat commercial property growth. Others say the forecast, which was released in late February, could also be accompanied by increasing division between different kinds of properties and the types of funding they receive. External events such as fossil fuel price decreases have been known to contribute to reduced sales of certain financial vehicles, like the commercial mortgage-backed bonds that fund around 20 percent of commercial property investments.

The analysts' market prediction was contrary to earlier outlooks that called for as much as 5 percent growth. The low-growth prediction was unexpected because the value of many commercial real estate types had grown for years and continued to exceed levels seen prior to 2007.

The Morgan Stanley team said the relationships between property values and lending institutions was troublesome and that investors may be losing the loan-to-value leverage they typically enjoy. Because corporate earnings are reportedly slowing in advance of what some believe to be an oncoming economic recession, investors may experience difficulty maintaining the property-income growth they'd require to sustain returns. Additionally, factors like Federal Reserve interest rate decisions may make getting financing more of an economic burden.

Many market factors impact the viability of proposed and existing investments. When purchasing commercial real estate, companies and private investors need to consider necessities like financing, ongoing property maintenance and the business arrangements they'll need to enact to sustain their assets. In some cases, they may find it advisable to negotiate unique transaction and purchase agreements to ensure they receive properties they can actually manage profitably. They should also learn about how zoning could help or hinder their plans for development.

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