With a new year comes new market trends, and 2018 is no exception. Over the course of the last 12 months, we’ve been introduced to new technologies, new game players, a growing economy (despite many uncertainties), and potential reform to the tax code, among other factors. How financial institutions respond to these budding changes will affect both bottom lines and the ability to make market advancements.
Hand-in-hand with that growing economy, businesses are expected in 2018 to continue performing in a positive direction. That optimism will benefit all – businesses because they will be operating more efficiently, and banks/financial institutions because those businesses will need assistance in their growth.
In 2018, be on the lookout for these budding trends in the commercial real estate business:
Priorities are changing
The commercial lending world centers on payments and proper money movement. Because of the sheer volume of money changing its location, there’s a shifting priority, especially in more recent years, on transaction speed, efficiency, and accuracy.
In fact, research suggest that more than 75 percent of businesses feel they do better when they are able to provide instant payment processes. In 2018, expect innovations in payment and associated information speed to continue reshaping the commercial landscape.
We’re going digital
A recent study suggests that organizations will only see half of their customers, members, or clients in 2018. We mean “see” in the physical sense. With automation and the ability to integrate digital interactions, there will be less of a need for frequent, face-to-face encounters.
It’s 2018, after all – it’s time we lean harder on technology. Luckily, as more and more records get digitized, our jobs should become quite a bit more streamlined! As goes for any business and consumer, digital processes are usually more straightforward, cleaner, efficient, and easily digested. Digital formatting should also make spotting errors and systematic glitches timelier.
For example, a technologically-inclined commercial lending experience can provide a centralized point for business clients to:
- Check balances instantaneously
- Send and approve payments with the click of a button
- Perform internal transfers
Furthermore, financial institutions will benefit by accelerating processes, such as establishing, reviewing, and closing loans more quickly.
Focusing on interest rates
In December, the lending rate rose to a target range of 1.25 to 1.5 percent. At its December policy meeting, the Federal Reserve left unchanged its forecast for three 2018 rate hikes, following three increases in 2017. Still, there’s uncertainty surrounding whether it will stick to its plan to continue the rate hikes and what it might do about the stubbornly low inflation.
You’ll notice a focus on the interest rate trends this year. If interest rates don’t rise significantly, the cost of borrowing and value of properties should remain stable. On the opposite end of the spectrum, however, no significant rate hikes could carry the risk of a bubble as it removes lender incentive to tighten lending standards.
And, while we’re at it, it could be an indication of a weakening economy, which could in inhibit the commercial lending industry.
Keeping security forefront
It goes without saying that no business will succeed, especially financial institutions, without adequate security measures – both technological and logistical.
In 2018, those financial institutions are continuing to incorporate additional security tools and applications to help deter fraud and security risks. At Oxford Appraisal Management, for example, we operate from a high-availability secure system that is fully customizable for the access and security levels you require. We always require login credentials, and ensure that your information is protected.
The increased focus on security is no real surprise given the ever-growing number of backdoor cyber threats. But through satisfactory measure, the threats can be mitigated.
There’s a power shift
With a growing amount of data available to the consumer about their loans and accounts, there’s a power shift that is placing the customer in the driver’s seat.
This year, we’re seeing that more and more clients are looking to organizations and establishments that provide superior customer service and keep the client in the know. Empowered customers are wreaking havoc on markets that maintained once-sturdy, conservative, “hands-off” business models.
Power is shifting away from institutions and to the customers.
Marketing changes
Going along to meet the demands in the power shift, there’s a change in our marketing style. We’re getting more personal, more human, in our market this year.
In 2018, many commercial lenders – prioritize building long-term relationships as opposed to acquiring more leads. Keep an eye on the churn rate of your company to monitor the long-term health of your marketing and brand.
Industrial taking over retail?
2017 was a record year for retail, and not in a good way. According to the latest numbers, nearly 7,000 store closing announcements were made – a tripling from 2016. And, apparently, there’s more where that came from.
Researchers say the number of U.S. store closings is expected to jump at least 33 percent in 2018, to more than 12,000 (Gap, Banana Republic, Sam’s Club, and J. Crew are some of the companies that have already announced plans to close stores).
As e-commerce grows, the retail sector’s need for commercial real estate isn’t disappearing, but rather is shifting as industrial real estate – namely, warehouses and distribution centers – play an ever-bigger role in the retail industry. Therefore, lenders will notice an increase in industrial lending as opposed to the more traditional retail lots.
Businesses big and small look to their financial institutions for lending in order to make critical processes possible. In the changing market of commercial lending – defined by things like instant transactions and comprehensive customer services, financial institutions must be more than just the client’s deposit holder.
Instead, commercial lender needs to adapt – offering the comprehensive tools and processes that are essential to success.
At Oxford Appraisal Management, we have always been committed to three core principles – expertise, service, and independence. When it comes to your commercial real estate needs, our experts are always ready to lend a hand. Get in touch with us today.