Federal Reserve concerned about commercial real estate sector

Commercial property values around the country have soared in recent years, and this has prompted fears about investor exuberance and a growing real estate bubble in major cities like Chicago and New York. In December 2016, the U.S. Federal Reserve took action to keep inflation in check by raising interest rates, and experts expect as many as three similar increases in 2017. However, there is concern in the nation's capital that this may not be enough to prevent these markets from overheating.

Data from leading financial information companies shows that commercial real estate prices are now 20 percent higher than they were before the 2008 financial crisis, and this has aroused fears about overbuilding and a looming glut of empty and unwanted space. The commercial rental market in New York City has slowed considerably in recent months, and many analysts are worried that the situation could be exacerbated by the large number of luxury apartment buildings and multi-family projects nearing completion across the country.

Commercial mortgage delinquency rates are predicted to rise to 5.75 percent in 2017, and the Federal Reserve has indicated that stiffer regulations and not monetary policy are the key to solving the problem. This has some observers worried because the White House has already placed a temporary hold on all new federal regulations, but others are more optimistic because of the president's background in the industry and his understanding of the market.

The rewards of commercial property investment and development can be significant, but much can change in the time it takes to complete a major project. Time is money in the real estate sector, and attorneys with a background in this area could help their clients to avoid unnecessary and potentially expensive delays by ensuring that regulatory, zoning and land use issues are addressed expeditiously.

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