Latest Finance Trends

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

C-PACE is positioned for continued exponential growth, especially as the commercial real estate sector deals with higher interest rates and economic uncertainties. The increase in C-PACE adoption — as evidenced by its expansion into new states and jurisdictions, as well as the enhancement of existing programs — underscores its potential as a viable financing mechanism. More

Manufactured housing communities (MHC) will be a favored property type amongst the agencies, life companies, banks, CMBS, debt funds and private money lenders. The level of interest in this space has vastly increased over the last few years. With office and retail difficult to finance and plenty of competition in multifamily and industrial, MHC has quickly become an attractive option. Similar to multifamily, the agencies provide substantial liquidity in this space, offsetting the reduced lending by regional banks, which have cut back over the past two years. There is a need for low-income affordable housing, which is increasing demand for renters and leading to a strong performance. Keep an eye out for new lenders entering the sector and watch for the CMBS players to be more aggressive this year. More

Life company lending will be elevated versus 2023, but lenders will still struggle to meet their goals. The pipeline has been flowing so far this year, although the deal flow of the acquisition market remains light and will limit lending. However, cap rates are moving up and more acquisition volume later in the year will help get capital moving. Most LCs are averse to doing office, which is also limiting originations. LCs will continue to be conservative with terms, although they are being forced to compete on price in order to get money out the door. More

C-PACE is positioned for continued exponential growth, especially as the commercial real estate sector deals with higher interest rates and economic uncertainties. The increase in C-PACE adoption — as evidenced by its expansion into new states and jurisdictions, as well as the enhancement of existing programs — underscores its potential as a viable financing mechanism. More

Construction lending should start to pick back up this year, although lenders will continue to be selective. Watch for lenders to be more open to retail and hotel development, while office will remain the toughest to finance. Look for lenders to put more emphasis on location going forward. They are going to be hyper-focused on basis and realistic rents. Debt fund and private money lenders will lead the pack and be the best bet for borrowers. Although, watch for life companies to re-enter the construction lending space as a way to grab yield. More

The mezzanine lending space will be more active this year, especially for recapitalizations, rescue capital and ground-up construction loans. There is a lot of mezz and pref equity ready to be deployed. However, the recent decline in property valuations due to higher interest rates, increased expenses and the slowdown in rental growth poses a significant challenge for those seeking to refinance maturing loans. The diminished appetite among investors to inject equity into projects this year is likely to further impede sales and new development in the short term. More