USA - ALABAMA Trends and Developments Contributed by: Adam J. Sigman, Crystal H. Walls, Nathan Stotser and Katie Sinclair, Dentons
It is also important to note that, while climate change is not a huge factor in Alabama real estate transactions, the authors are seeing more climate-friendly amenities being included in pro - jects, such as car-charging stations, window and roof updates, and so on. Conclusion: Looking Ahead in 2024 2023 saw resiliency in the commercial real estate market reduced and limited to certain asset cat - egories and markets. Developers needed to be able to thread the needle when planning to make projects work financially. Construction pric - ing and interest rate lines reduced new project acquisitions and debt/equity closings. Higher interest rates and stricter loan-to-cost and loan-to-value requirements have impacted on transaction flow. For private equity, dictated by equity investors, there has been an overwhelm - ing surge toward preferred equity over common equity. While preferred equity offers investors return opportunities with less downside than common equity, a developer’s/sponsor’s other source of funds (equity) has also become more challenging in today’s environment.
These factors appear to be impacting on all mar - ket segments of development, including multi - family, industrial, and retail. Alabama has felt the effects but has showed resiliency through the periods of extremely high interest rates, and has maintained its above-average status in the homeownership market and its below-average unemployment rate. While the Federal Reserve claimed that three rate decreases would occur in 2024, none have yet occurred, which has caused some concern as to whether the pro - jected cuts will occur as planned or be pushed to the end of 2024 (or even 2025). However, more letters of intent (LOI) for transactions are being seen, even before the first promised rate decrease, which is a positive sign. When rates do go down and permanent refinancing goes up, the authors believe that construction credit will become more available, and this will drive further development going forward.
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