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Large investors are leaving the commercial real estate market

The volume of commercial real estate deals in Maryland and the rest of nation fell by 11 percent in 2016, something that has not happened since 2009. A recent Wall Street Journal report reveals that prominent real estate investors are cutting their holdings and withdrawing money from potential investments. This has led many to wonder why the significant players in the real estate market, such as asset managers at hedge funds, pension funds and private equity firms, are pulling out of the market.

Extremely low cap rates are one reason large investors are selling their commercial real estate assets. The cap rates in certain sectors are well below normal, and since this trend is unlikely to continue, many institutional and larger investors are withdrawing their money from real estate ventures.

The departure of larger investors is also attributed to increased interest rates. When interest rates rise, commercial properties tend to look more financially uncertain than other types of assets. Institutional investors are opting to invest in less risky industries that can provide comparable financial returns.

It can be years before a commercial property is ready to come online. The new commercial properties that are available for use now were planned three to five years ago and will put pressure on the existing buildings' vacancy and lease rates, eventually leading to lower prices.

Attorneys that specialize in real estate law may be able to provide commercial real estate investors with an array of helpful services. A lawyer may litigate in order to resolve legal disputes regarding zoning or financing as well as arrange real estate closings, draft purchase or lease agreements or oversee the transfer of ownership of commercial real estate.

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