Commercial Grade is a weekly post by John Cicero, MAI who provides commentary on issues affecting real estate appraisers, with specific focus on commercial valuation. John looks forward to the day when appraisers are not seen as a nuisance, and its sooner than you think.
Disclosure: John is a partner of mine in our commercial real estate valuation concern Miller Cicero, LLC and he is,
on Thursdays on Wednesdays, one of the smartest guys I know. …Jonathan Miller
Heading into the end of 2006, we find ourselves trying to gauge what 2007 will bring in the commercial real estate market, and by extension, what it means for the commercial appraisal profession. Will we be working at the same torrid pace that we did throughout the year, or will we be dusting cobwebs off the ceilings?
In his article Banks are Pulling the Plug on Loans [SA], Bill Cara provides some insight. He reminds us that it is the bankers who regulate the money supply for commercial real estate loans, and they are pulling back. In a Senior Loan Officer Opinion Survey, 36.5% of the bankers surveyed reported that loan quality is likely to deteriorate, and 41.8% reported that loan standards have tightened. This suggests lower commercial loan volume from the banks in the near future.
More restrained lending is not a bad thing. We “old timers” remember what happened in the late 80’s when banks couldn’t push money out the door fast enough. For borrowers it’s been a “buyer’s market” and they got to call the shots with the lenders (including, remarkably, which appraiser to use). I look forward to borrowers no longer taking their ability to finance for granted. Means that they’ll be a little more responsive to our requests for property data, and not treat the appraisal process like a nuisance.