An MBA CREF Recap: Headwinds and Tailwinds in Commercial Real Estate

Friday, March 11, 2022 | By Daniel M. Pallone, CPA, Vice President, Mortgage REIT and Loan Solutions

An MBA CREF Recap: Headwinds and Tailwinds in Commercial Real Estate

The COVID-19 pandemic has inspired an evolution in commercial real estate, and we heard a lot about this at the recent MBA CREF/Multifamily Housing Convention & Expo.

New ways of using commercial real estate are emerging rapidly—from retail to office space, housing to industrial. Familiar categories such as these are changing to meet new needs and preferences as the industry adjusts to a new normal. For example, as more offices switch to hybrid models that include work-from-home and in-person set-ups, flexible mixed-use office space will be essential for future success. Many of these changes create a nice tailwind for investors—opportunities to increase revenue.

But, opportunities and challenges always go hand-in-hand. So, along with the tailwinds, portfolio managers must also be ready to navigate headwinds.

Headwinds in 2022

The cost of just about everything from appliances to labor is going up, and renters are footing the bill.  However, as rents continue to rise in the multi-family space, we are hearing speculation around implementing rent control measures—whether at the city, state or national level—to relieve the pressure on renters. Pervasive rent control would limit landlords’ ability to keep up with rising and changing overhead costs that are associated with inflation and with the costs connected to more modern operating models, such as increased needs for staffing and the higher wages and salaries that it takes to keep them. Add to this, a growing need for lenders to continuously update technology so that they can accurately track data for increasingly demanding and complex internal and external reporting requirements.

Whether the headwinds originate from inflation itself, increased overhead, or from capped income, the best way to address them is through controlling internal costs. One way to do that, while also relieving other aspects of that internal burden, is outsourcing.

Outsourcing isn’t just about reducing employee overhead. It can position you to make the most of new opportunities while solving for some of your most challenging problems. As landlords work to evolve their properties for success in the post-pandemic era, they may find themselves dealing with multiple outdated and disparate legacy systems, which tend to be error-prone, expensive to maintain and difficult to update. Outsourcing with a partner that specializes in technology in commercial real estate investing gives you a sort of “fast pass” to modern technology and deep expertise.

SS&C provides outsourcing services at scale, with modern technology to provide greater efficiency. Precision LM allows you to consolidate disparate platforms into a single platform.  If you would like to learn more about how SS&C’s Precision LM can support your post-pandemic commercial lending needs contact us or download our "Comprehensive Loan Management Delivered in a Single Solution" brochure.

Commercial Lending

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