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Commercial real estate financing may soon tighten

On Behalf of | Jul 14, 2016 | Commercial Real Estate

Both small business and commercial real estate owners often rely on commercial real estate lending in order to purchase properties. A large number of properties have commercial mortgage loans that are set to mature in 2017. This could soon lead to a number of owners scrambling to secure financing in order to refinance their loans.

Morgan Stanley refers to the maturing loans that are expected in 2017 as the wall of maturities. Analysts at the financial services corporation estimate that 50 percent of the loans that will mature during that year will need to be refinanced. People who own multifamily properties or strip malls may find it very difficult to secure the funding they will need.

In the past, small banks have stepped in to offer financing options for multifamily property or strip mall owners who are ineligible for government-sponsored enterprise financing. Currently, however, commercial real estate prices are flattening. At the same time, smaller banks in secondary and tertiary markets have taken on a record 52 percent of the loan originations for those markets. With a high degree of exposure to risk comes increased scrutiny by banking regulators. This may make small banks highly reticent to offer financing to certain types of property owners in the next few years.

People who hold loans for commercial property they own may want to seek the advice of an attorney who accepts representation of real estate clients. An attorney might be able to help a client identify alternative funding sources if there is a difficulty securing financing. A lawyer may also help with all of the legal aspects of commercial real estate transactions for his or her client. This may help the process to go much smoother so that the client can concentrate on his or her planned developments or projects.