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    Construction lending will slowly build into next year

    There will be plenty of capital in the market for construction, however, lenders will be heavily scrutinizing deals. Fewer projects, higher rates and regulatory issues have slowed the number of transactions being funded. The high cost of borrowing will also make construction lending more difficult. Banks and life companies will be in the market, although with lower leverage. Watch for more available capital from non-traditional sources to fill the gap. There will be a large number of construction projects that need capital next year. Anticipate lenders being more selective with who they will work with. More

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    Lenders are shopping for retail

    Count on retail lending to loosen going forward, especially for fully leased centers with solid tenants. More lenders will switch back to retail next year, especially as office remains tough to finance. Look for life companies to be the best source, while the CMBS market should pick up in 2024. Banks will actively lend on retail, but will require substantial deposits from borrowers — typically 10% to 30% of the loan amount in deposits. In 2024, retail should be seen as a stronger asset type by lenders, as the property has exceeded expectations in fundamentals and loan performance. More

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    Life companies will be more appetite driven in 2024

    Life company lending will be in high demand for the rest of the year. Although, many LCs will soon run out of allocations for 2023, so some borrowers might have to wait until Q1 to get deals funded. Anticipate life companies to be the most competitive capital source next year, especially as banks reserve their dry powder for existing borrowers. Life company money will be the most attractive option for many borrowers due to their scale and flexibility of capital. More

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    Industrial remains the darling of CRE

    Industrial will continue to be in high demand from lenders and one of the preferred asset classes due to the positive fundamentals in the space. Competitive terms will be available for quality assets in gateway markets, operated by strong sponsors. However, look for higher rates and lower leverage. Movement in the underlying indices will impact all-in borrowing costs and total leverage. Most deals will also be debt service coverage ratio constrained. More

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