With the availability of good financing being so vital to maintaining a healthy commercial real estate market, it’s important to take a look at what the experts are now forecasting for us within this arena. After all, any changes in the percentage of down payment that’s required for purchasing property, as well as any changes in interest rates, will have a big impact on the continued interest of buyers towards purchasing more commercial real estate, and it will have a big impact on the price that they’re willing to pay for their commercial properties, too.
With this in mind, the experts are telling us that the forecast for the continued availability of solid financing is still good. The Mortgage Bankers Association is finalizing their numbers for calendar year 2018, but as of this time they are estimating that calendar year 2018 will show an approximate 3% increase in the total number of loan originations over calendar year 2017. In addition, the good news is that lenders by and large are still positive about finding more good opportunities for placing more loans in 2019.
In terms of commercial bank lending, the properties that they are generally the most interested in lending on right now rank in the following order: multifamily, industrial, office, hotels, and then finally, retail. Furthermore, according to the Mortgage Bankers Association’s 2019 Commercial Real Estate Finance Outlook Survey, approximately 74% of the bankers surveyed believe that the total volume of lending in 2019 will meet or exceed 2018 levels, and only 26% of the bankers surveyed believe that the total volume of lending will decrease. With this in mind, one of the reasons that multifamily loans have been so attractive to the industry is because they have been performing so well, with the delinquency rate on those loans being near all-time record lows. This makes perfect sense with all that we’ve been hearing around the increased demand for more multifamily housing nationwide.
However, at the same time, lenders are being more cautious at granting loans on new development projects, as by the time the new project then comes to market, we could be in a very different economy than the one that we’re living in right now, and the project could still be in need of finding new tenants at that time.
So as of right now, the continued availability of good financing looks good. In addition, while this may be reassuring, there’s the old expression that says that “a banker is someone who will loan you their umbrella when it’s sunny, then ask for it back the moment it begins to rain.” With this in mind, cautious optimism seems to be the best approach in moving forward.
