Experienced Kansas City Construction Law Firm

  1. Home
  2.  → 
  3. Uncategorized
  4.  → Some commercial property loans more difficult to obtain

Some commercial property loans more difficult to obtain

On Behalf of | Mar 31, 2016 | Uncategorized

Missouri developers hoping to obtain financing for a commercial property may experience some difficulties because of more stringent loan underwriting requirements and the sluggish economy. According to a Wells Fargo representative, slow economic growth for 2016 may have a negative impact on the amount of commercial real estate sales. As a result, there may be fewer lenders willing to fund risky real estate projects. In fact, by the end of 2015, which was the end of the six-year recovery in commercial property values, fewer commercial properties sold because of the increased number of qualifications for obtaining a loan.

Because of the construction boom in urban markets such as Miami and Manhattan, there has been an overabundance of expensive construction projects including high-end hotels and condos. However, these types of deals are most likely to experience difficulty obtaining financing. In fact, a representative with an investment firm that loaned $275 million for the development of Miami condominium projects said that his company has become more cautious about which project it will fund.

Limited credit availability is also being hurt by the dysfunctional commercial mortgage bond market, and the fact that there has been a deceleration in the issuance of commercial mortgage backed securities. As a result of the CMBS market breakdown, leveraged commercial property owners are looking for different refinancing methods. As more regulated lenders leave the sector, private lenders might fill the gap.

Those planning to develop commercial real estate may have to face a number of obstacles in addition to financing, including zoning and land use issues. A real estate attorney can often be of assistance with these types of transactions.

Source: The Real Deal, “Commercial real estate credit crunch coming?”, March 20, 2016.