14A — January 22 - February 18, 2021 — 2021 Forecast — M id A tlantic Real Estate Journal
www.marej.com
2021 F orecast
By Neil A. Stein, Kaplin Stewart Prognostications for the coming year in commercial real estate
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commercial real estate and those lawyers who practice in that arena. Pessimism is not in the DNA of the CRE industry. However, 2021 will present challenges for CRE. Residen- tial real estate will continue to benefit from low-interest rates and high demand, no- tably multi-family housing. Although calls for robust ten- ant protection and continuing eviction bans will provide headwinds. Tax incentives and abatements for afford- able housing, and opportunity zones, may face elimination
as local government reacts to budget shortfalls. Non- residential assets face a lon- ger recovery time. Despite recent vaccine distribution, lockdowns persist. Urban CRE will be less popular in areas where respectful politi- cal discourse have given way to open hostility. Elected of- ficials must get substantial financial help into the hands of those in need, many of whom are unemployed due to the lockdown of small and medium-sized businesses. Some CRE hotels, for ex- ample, have already been
hurt by the enhanced scru- tiny of the financial system and new hurdles to flexible real estate lending practices. Government has taken notice of the recent all-time high of $3.06 trillion in CRE debt and the 10.2% of $600 billion in CMBS loans now in “special servicing.” Loan distress is fast approaching the levels seen in the 2008 financial crisis. Some troubled asset classes could snap back, although the time horizon for recov- ery may approach years. Unfortunately, some office
buildings will never again approach full occupancy, now that many homes have been transformed into pseudo office space. While some may miss the social interaction of physi- cally being at the workplace, few like the absence of long commutes and high transpor- tation costs. With that introduction in mind, here is my vision for the CRE legal community. • Not unlike the 2008 crisis, distressed CRE loans will result in foreclosure, modifi - cation, or the ubiquitous prac- tice of “extend and pretend.” I forecast a long and profitable run for financial service at - torneys and their opposing counsel. • Transactional attorneys may see fewer outright ac- quisitions, although potential purchasers flush with cash will be actively bargain hunt- ing for deals. While there may be fewer new lease or loan transactions, modifications will continue unabated for the foreseeable future. • Land use and environmen - tal attorneys should expect con- tinuing growth in residential and institutional development, including multi-family, senior living, memory, and assisted living facilities. Development of large parcels of land for dis- tribution hubs and life science campuses will remain popular. Conversions of retail and office buildings to multi-family or non-traditional mixed uses will be popular. Not to be pessimis- tic, but…we have all heard the calls for stricter environmental regulation for new develop- ment. It will be interesting to see how enhanced environmen- tal regulation can co-exist with the promise of new infrastruc- ture construction. • Litigators may also find themselves busy. As some existing properties encounter financial distress, one could expect an uptick in owner- contractor litigation, tax ap- peal litigation, and bankruptcy filings and foreclosures. If government embarks upon massive infrastructure proj- ects, condemnations will be necessary. I have no doubt that 2021 will be a better year. It can’t get worse, right? Neil A. Stein is a princi - pal of Kaplin Stewart and a member of the Land Use, Zoning & Development Department. MAREJ
orecasters, political or weather (think Punx- sutawney Phil) sel-
dom admit pr i or fai l - ures. Casey Stengel as- tut e l y ob - served that one should “never make predictions, e spe c i a l l y
Neil A. Stein
about the future.” With due respect to Casey, I have agreed to engage in the fruit- less endeavor of forecasting the immediate future of
Firmly Rooted in the Law and in the Community We are well grounded in every facet of real estate law, from acquisition to construction. We are committed to serving the needs of our clients and our communities.
Contact: NEIL A. STEIN • nstein@kaplaw.com 910 Harvest Drive, Blue Bell, PA 19422-0765 • 610-941-2469 • kaplaw.com Other Offices: • Cherry Hill, NJ 856-675-1550 • Philadelphia, PA 215-567-3120 Kaplin Stewart A t t o r ne y s a t Law
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