Although lenders as a whole haven’t given up on commercial real estate loans, a lot of them have tiptoed toward the sidelines. Debt funds and smaller banks will likely become increasingly active in commercial real estate lending to fill the void left by CMBS lenders and big banks, according to Omar Eltorai, lead market analyst at New York City-based commercial real estate platform Reonomy.
“Everybody is yield-hungry, and commercial real estate still has a pretty attractive profile. So, I think there’s going to be a lot of money chasing that exposure,” Eltorai says. “But where’s that money going to be coming from? I think it’s going to generally be from the lenders that have fewer headwinds and fewer restrictions.”
Because of the headwinds faced by many lenders, it’s no surprise that U.S. real estate deal volume tumbled 68 percent this August compared with last August, according to New York City-based data provider Real Capital Analytics Inc. (RCA).
“Before the pandemic, most borrowers had many financing options. Now, options are much more limited and lenders can be more selective,” says Rob Weil, principal at JDI Loans, the lending division of Chicago-based private equity real estate firm JDI Realty LLC. “Lenders now have the opportunity to use more conservative underwriting standards, or charge a premium if the lender is willing to expand the underwriting standards.”
Suraj Shrestha is an associate at Harborside Partners. He has been taking the lead role on research projects; to develop and implement online marketing strategies for search engine optimization and social media marketing. He is one of the core parts for helping to grow business revenue and the company’s online presence.