Sara Havlena

Retail will continue to be a preferred product type going forward. Underwriting standards will loosen with declining interest rates. There has been so little development in retail, which has allowed the sector to maintain high occupancy. Look for a push toward new development next year. The location will not be as important going forward; as long as it’s a strong center with favorable tenants, borrowers will see available capital. Demand drivers will be key going forward. CMBS lenders are back versus a few years ago leading to more capital and competition in the space. More

Condo lending will open next year, especially as rates come down. Demand will be stronger as workers return to cities where condos are more affordable and often more convenient. Underwriting will loosen as rates drop, which will be beneficial to borrowers. The biggest factor will be presales. The construction lending market for condos will be liquid, especially among the debt funds. Lenders want to see presales that support the underwritten sellout, and lenders will be leverage-sensitive due to the usage of borrower deposits in certain states, which creates additional leverage for the sponsors. There will also still be a need for condo inventory loans as developers need time to sell once they are built. More

Watch for CMBS lending volume to vastly improve next year and pick up even more in 2026. Borrowers will like this option as the majority of conduit deals are sized off of an interest-only debt service, which allows CMBS to offer higher proceeds. Also, most banks now demand a deposit relationship of a minimum of 10% of the loan amount, which CMBS lenders do not require. Also, CMBS lenders do not charge origination fees compared to most banks, which charge anywhere from 0.50% to 1%. Most conduit CMBS loans are interest only for some part of the term allowing additional cash flow after debt service, which is very attractive to borrowers. More

Anticipate strong demand from lenders for industrial product. Watch for them to become more creative with structure in order to compete. With a lot of industrial having been built over the past few years, lenders will focus on markets with strong occupancies and reasonable rents. Although, any property that has strong market fundamentals should receive more favorable terms on both bridge and permanent financing. More