Trends in the commercial real estate debt financing market

Investing in commercial real estate will usually require acquiring debt. It has been almost a decade since the Great Recession, and the commercial real estate financing industry is not the same as it once was. Kansas investors and developers may benefit from being familiar with the current state of commercial real estate lending.

Although they are being more cautious about their lending habits, banks are still a good source of financing. According to the Federal Reserve Bank of Richmond, the lending for commercial real estate projects in the United States has exceeded the levels of that before the Great Recession. This is attributed to the appeal American property holds for foreign investors, low interest rates and the high demand for apartment rentals.

Commercial mortgage-backed securities, or CMBS, loans grew in the third quarter of 2017. There were $66.6 billion worth of new CMBS loans for the quarter, which is a stark increase from the same quarter in 2016. The belief that tough lending regulations would stop banks from dispensing loans began to waver in the beginning of 2017. Although there were no loans issued in January 2017, by August 2017, a total of 335 loans valued at $10.65 billion were issued and demonstrated the significant change in lending attitudes.

The emergence of alternative lenders as major players in the debt financing market is another development of which investors should be aware. They often provide the loans that the big banks refuse to by providing temporary loans borrowers can use for assets while pursuing financing that is more permanent. Commercial property developers might find it advisable to discuss the terms of a proposed loan with their attorneys.

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