Rising Interest Rates Are Squeezing Commercial Real Estate Profits

The commercial real estate world is experiencing seismic shifts as developers struggle to make new projects pencil out in today's challenging economic environment. At the heart of this evolution is the drive-thru retail sector, where experts like Chris Hatch have spent decades perfecting the delicate balance between land costs, construction expenses, and tenant rents.

When you pull up to your favorite coffee shop or fast-food drive-thru, you're experiencing the end result of a complex development process. Behind that convenient service window lies months or years of site selection, financial modeling, and careful negotiation. With interest rates substantially higher than in recent years, the traditional formula has been disrupted, creating what Hatch describes as "five straight years of absolute pain trying to figure out how to solve pro formas."

What makes this particularly challenging today is the perfect storm of economic factors: landowners reluctant to reduce prices, construction costs remaining elevated, municipalities charging substantial impact fees, and end investors demanding higher returns to offset increased borrowing costs. The result is a squeeze on developers trying to make projects financially viable.

Guest: Chris Hatch is the Manager of the Forza and is proud to be a third-generation real estate professional. He started his real estate career learning under the tutelage of his father and grandfather. After several years of establishing his base knowledge in real estate, Chris joined Professional Brokers in 2002. At Professional Brokers, Chris was an active commercial sales and leasing agent and helped with acquisition and disposition as well as assisting a handful of retailers with expansions throughout the Intermountain Area. In 2006, Chris created a partnership with Jake Olson creating a boutique retail brokerage shop, IRG Retail. Chris holds active real estate broker licenses in Utah, Montana, Nevada, and Idaho. He is an avid outdoorsman as well as a rabid LV Raiders fan. Over the years, he has worked with developers, architects, engineers, city officials, banks, property owners, and many retailers. Chris believes clear and timely communication is essential in maintaining an effective working relationship with clients.

Connect with Chris: 
http://legendllp.com/
http://forzacommercial.com/

Find Du Charme Wealth Management here:
https://ducharmewealth.com/contact-us/

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[00:00:00] Growth and Challenges in Retail Development.
[00:09:10] The Dirt Dog Approach to Site Selection.
[00:16:56] Building the Pro Forma and Deal Killers.
[00:25:21] Market Shifts and Rising Interest Rates.
[00:34:10] Drive-Thru Specialization and Development Timeline.
[00:42:07] Commercial Real Estate Investment Opportunities.

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Information presented on this program is believed to be factual and up-to-date, but we do not guarantee its accuracy, and it should not be regarded as a complete analysis of the subjects discussed. Discussions and answers to questions do not involve the rendering of personalized investment advice, but are limited to the dissemination of general information. A professional advisor should be consulted before implementing any of the options presented. Encompass More Asset Management LLC is a registered investment adviser with the U.S. Securities and Exchange Commission (SEC) and only transacts business in states where it is properly registered, or is excluded or exempted from registration requirements.