QE3’s Impact on Orlando’s Commercial Real Estate Market

In an effort to jump-start the ailing American economy, the Federal Reserve announced its third round of quantitative easing (QE3) in mid-September. Two of the main measures of QE3 consist of the Fed’s purchase of mortgage-backed securities and the ongoing Operation Twist, a safeguard designed to keep lending interest rates low. This latest announcement by the Fed bodes well for Orlando commercial real estate appraisers, who are expected to be busy over the next few months.

Commercial Real Estate Activity During QE1 and QE2
The previous monetary policy interventions by the Fed pushed the pricing of commercial MBS paper higher, and managers of Real Estate Investment Trusts (REITs) found it easier to borrow funds for their commercial ventures. Home prices across the United States have tumbled since 2007, but commercial real estate assets in Central Florida have enjoyed gains — particularly right after QE1 and QE2.

Another trend of the first two QE rounds was the migration of real estate investors from housing to commercial properties, something that can be anticipated this time around as well. During the QE1 period, from late November 2008 through the end of March in 2010, REIT managers reported a flux of new investors. A similar situation was observed during QE2, which began Nov. 3, 2010 and lasted until the end of June 2011.

QE3 Expected to Boost Commercial Real Estate Values
In normal housing markets, investors flock to residential properties as flight-to-safety assets. The American housing market has been anything but normal since the bursting of the real estate bubble a few years ago, and thus investors are willing to allocate more funds towards commercial REITs. This increased flow of money in turn favors the valuations of commercial properties.

Some financial analysts expect that QE3 may boost the values of commercial properties over the next few months, but the yield for buyers, sellers and investors will be tighter this time around. The time to get an Orlando commercial real estate appraisal is now, since history shows that the greatest increase brought on by QE1 and QE2 occurred in the months immediately after the announcement by Fed Chairman Ben Bernanke.
For more information, or to schedule an appraisal, contact us at 407-929-8080 or info@commercial-appraisers.com.