As the commercial real estate market continues to exhibit signs of strength and stability, sales of small-cap real estate – that is, commercial buildings with a smaller capitalization value – are currently ahead of last year’s record-setting level, according to Boxwood Means, Stamford, Conn. The gap leasing supply and demand, growth in property prices and rising rents have all contributed to this trend.

The upward revision of the second quarter GDP to 3.7% has also spurred the growing demand and momentum in the market. “Other factors, including employment growth, wages and residential housing will supply further impetus,” according to Boxwood Means Principal Randy Fuchs.

According to Fuchs, the amount of investment in small-cap commercial real estate indicates that lenders, investors and small business real estate owners have moved past a sluggish first quarter and are now focused on the nation’s current economic climate.

“Against the backdrop of healthy economic growth, vigorous space market fundamentals and obliging debt markets, sales activity in the second half of the year is likely to produce record sales volume for the second year in a row,” said Fuchs.

At present, Boxwood Means doesn’t see any issues that would impede the small-cap sector’s progress. “If we have persistent healthy economic growth and only a modest rise in interest rates over the next six months, there’s every reason to anticipate that small-cap CRE prices will increase further and, in so doing, allow more loan refinances to pencil out in recovering markets,” said Fuchs.

With this sector of the market doing so well, commercial mortgage brokers may want to consider seeking out borrowers in the market to purchase small-cap commercial real estate. These borrowers have a real need for financing as well as assistance in finding the right commercial mortgage lender to aid in their purchases. By reaching out to these potential borrowers, you’ll be serving a sector of the market that is thriving, allowing for more closed deals and additional income. You can also check out our recent blog post about what you need to do when getting a small-balance commercial loan for a borrower.

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