Lenders' Insatiable Appetite for Commercial Real Estate
Each quarter, Chandan Economics and the Real Estate Lenders Association survey RELA's membership on the outlook for commercial mortgage lending, performance, and underwriting standards. The results of the survey are published in the widely-cited RELA—Chandan Survey of Commercial Real Estate Lender Sentiment. The following is an excerpt from the Fall 2014 survey. Current survey reports are available through the Real Estate Lenders Association and Chandan Economics.
In a More Competitive Lending Environment,
Conduit Originators Best Positioned for Gains
As the lending environment grows more competitive and underwriting standards ease further, CMBS lenders will be in the best position over the next year to grow their market share. According to the latest Survey of Commercial Real Estate Lender Sentiment, private and other non-bank lenders, as well as life companies, are also widely expected to grow their shares of the market. National and foreign banks and agency lenders may not fare as well, in part because of heavy competition for apartment financing opportunities and relatively slower continued growth in apartment transaction volume. At one extreme, the net share of survey participants projecting an increase in national banks’ market share was 20%. In contrast, 64% percent of respondents expect a higher market share for CMBS. Overall, lenders see their biggest production growth opportunities over the next year in the industrial, office, and retail sectors, consistent with a similar shift in investor attitudes regarding investment prospects.
The outlook for loan demand remains strong overall, particularly for term loans and loans backed by industrial properties. On the other hand, lenders see little room for further easing in multifamily credit standards or for sharp growth in multifamily lending volume. The net share of survey respondents expecting looser underwriting for apartments has fallen to just 4%, down from 9% in the Spring 2014 survey and 22% in late 2013. Net fewer than 20% of respondents expect to grow apartment production.