While Montana’s heated CRE and residential markets pause to recalibrate in the wake of rising interest rates, the SterlingCRE Advisors team carefully tracks a key metric for commercial properties: days on market. Comparable properties trading even in the last three months might not set accurate expectations when it comes to the time it will take for a building to sell.
After 12+ months of strong transaction activity, Claire Matten, CCIM/SIOR, noted that Montana markets are in a wait-and-see pattern. “Investors, developers, lenders and all of us in the CRE industry are in the midst of wrapping our arms around the direction of the capital markets” Matten says.
“It’s been a ‘pencils down’ moment while buyers and sellers attempt to understand where exit cap rates are going to start trending.”
– Claire Matten, CCIM/SIOR
As a result, the average number of days on market will likely increase over the coming months. That’s not to say that commercial property sales will stall completely, Matten says. She points to a property at 2700 Clark Street in Missoula as an example. “The property at Clark Street in Missoula went from being listed to under contract in two weeks to a business that had strategic growth plans and saw the opportunity to make a move.”
It’s also an opportune time for occupiers who own their buildings to consider any potential adjustment in the interest rate on the debt they hold. If a large adjustment is coming, a long-term sale/leaseback could be a great opportunity to tap into the equity in the real estate to pad capital reserves for shifts in business operations.
Matten also notes that the leasing environment is still strong and she has a positive outlook on Montana commercial real estate markets overall. “There’s some uncertainty out there, no doubt, as days on market increase and interest rates rise.
But, there is sustained interest in Montana from national and local companies. We might need to adjust our timing and pricing expectations, but Montana owners are still in an excellent position.”
Contact Claire Matten, CCIM/SIOR for more insight on the state of the market.