NEW YORK CITY-When Dennis Yeskey, founder and managing director of Yeskey Real Estate Consulting & Investment, made a list of commercial real estate predictions for 2011, he gave himself an ‘A’ in most categories. Except for one. “Government action,” he said. “I was dead wrong.”
That’s why, this year, he advised the city’s best and brightest female CRE leaders at NYCREW’s “Global Trends in the 2012 Real Estate Capital Markets” event on Wednesday evening to watch out for Dodd-Frank legislation and new industry regulations that could effect commercial real estate.
"We’re looking at a Presidential year and a backlog of regulations, so if you’re a bank, now you’re going to be subject to them," he said.
After being blindsided by the debt ceiling debacle and the S&P sovereign credit downgrade, Yeskey—like many in the CRE industry—had greater expectations for the second-half. “We thought lots of things would happen in 2011 and there would be a lot more action,” he said. “We thought there would be clarity in the market and it would help the financial market and build investor confidence. But we were dead wrong.”
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Yeskey predicted that the Volcker legislation won’t be fully implemented in 2012, but several parts can take effect. “It might squeak through, but there is a massive lobbying effort on part of the banks and the financial world that has really put that back on its heels,” he said. However, on Thursday, the US Commodity Futures Trading Commission proposed a ban proprietary trading under the Volcker Rule, which may gain steam as the year presses on.
If passed, its impact on commercial real estate could change reporting standards and overall earnings. “A lot of fundamental components of the regulations say that banks have to hold more capital, have liquidity ratios and pay their people differently,” he said. “What that means is they are not going to be willing to lend as much money at such a high LTV for a long time.”
But overall, Yeskey predicts slow GDP growth of 2% and steady employment gains. “This is my fifth up cycle, and when you come out of the cycle, lending is more conservative and people are making better loans, and that’s all true,” he said. “This time, it’s going to be extended out even further because the banks are going to be penalized. It actually might be good in a little way because you don’t get the boom-bust cycle happening quite as fast.”
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