Latest Finance Trends

There will be plenty of available capital for small retail deals, even from the local and regional banks. Count on lender optimism in the retail space, as fundamentals are strong, partially driven by the high costs to build new product. Lenders like that the sector has not been overbuilt and much of the obsolete product More

Count on bank lending to remain conservative and cautious throughout the rest of 2024. Bank lenders are awaiting further guidance from the Federal Reserve regarding rate cuts and the upcoming election, which should provide more clarity on the direction of the market heading into 2025. The cost of capital will continue to put a damper on lending activity. Some banks with dry powder are seeing the disruption as an opportunity to fund high-quality loans with the best borrowers at higher rates. More

There will be plenty of capital market interest in self storage this year, as this is considered a safer asset class. Self storage has continued to be a top-performing property, which makes lenders and investors confident. There has been some overbuilding in certain markets, but new construction is expected to slow in those areas as lenders steer clear of markets that are oversaturated. Underwriting will be more conservative and count on lenders to take a closer look at supply. Borrowers will see lower leverage and higher spreads. More

Look for most of the life companies to be active during the second half of the year as they strive to meet allocations. Total 2024 life company originations will be greater than 2023, although not up to the highs seen in 2021/2022. Life company spreads have come in since the beginning of the year. Debt service coverage ratios will remain tight in the current high-interest-rate environment. Leverage could go up slightly for the strongest deals. Look for life companies to be more open to retail this year, as their portfolios are heavily weighted in multifamily and industrial. They will be aggressive on refinances with low leverage, while cautious with cash-out refinances. More

Equity investing will stay limited until the money-center banks return to the sector and more transactions hit the market. Despite there being an enormous amount of equity capital on the sidelines, JV equity is much more selective. Anticipate a greater interest in pref equity versus traditional JV equity from institutional investors going forward. In times of uncertainty, many investors will prefer pref equity over JV, especially as return demands rise. Investors like the risk-adjusted returns with pref equity behind stabilized deals. Many equity investors are sitting on money, just waiting to see what the economy and rates will look like during the second half of the year. More

Multifamily has seen a tough start to the year with the lack of transactions and capital remaining on the sidelines. Conditions will likely ease in late Q3 or Q4 once the Fed makes a move to lower rates. Once that happens, capital will open, and transactions will pick up. There has been a dip in rents across the board and loan underwriting has been conservative. Lenders are having to be more creative to get deals done and borrowers will need to bring in mezz or pref equity to fill capital stacks. More

Equity investing has been tough to get done so far this year. There will be a need for a lot of equity going forward, as nearly $1.2T of commercial real estate loans will be maturing in 2024 according to Goldman Sachs. We asked the equity investors themselves what their predictions are for investing throughout the rest of the year and here is what they had to say. More

Financing for industrial will continue to be strong from all lender types, especially for stabilized properties and those with preleasing. Financing for spec industrial construction deals will depend on the submarket vacancy rate and the level of supply that is coming online. Industrial has a bit of an advantage over multifamily because of rents and government policies in certain markets. Borrowers will see plenty of available capital, although lenders could be a bit pickier going forward. More

Look for all types of lenders to seek retail deals throughout the rest of the year. Retail is stable and many consumers have returned to brick-and-mortar retail stores. Retail vacancies are at an all-time low and the lack of new development set to come online will continue to drive demand, as well as lead to better pricing. Look for lenders to be more aggressive in underwriting, with lower rates and more proceeds. As lenders work through challenged office loans and seek payoffs, they are looking to redeploy that capital into retail, a net positive for the retail sector. More

Borrowers will see available capital for office, although lenders will continue to be extremely selective and cautious. Refinances and acquisition loans will be challenging for the foreseeable future. Lenders will seek financially strong borrowers and properties with stable operating histories and no near-term lease exposure. Office lending will remain tough for a while as many lenders are still dealing with problem loans. Even if the loans are performing well, there will still be issues if they are maturing soon. Count on asset-by-asset underwriting. Borrowers who are trying to get financing without bringing new cash to the deal will face some hurdles. More

More lenders are going to be interested in hospitality for the foreseeable future. There will be ample capital going forward and it will come from a wide variety of sources. Watch for life companies, private money lenders and debt funds to be the most active, while CMBS will start to be part of the conversation again. Some banks are re-entering the sector, although most regional banks will still be limited. Debt funds especially had a tough 2023 so they have ample liquidity to put out. Lenders are seeing that they can grab yield in the hotel space as the pricing is higher than some of the other property types. More

Bridge lending will be more active this year, particularly as problems surface with maturing loans, especially CMBS deals. Once rates and pricing come down, expect even more activity and lenders returning to the market. Although, several factors could slow down bridge lending including rising rates and issues around the election. Look for life companies to be more active in bridge lending this year as a way to grab yield. More