Latest Finance Trends

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

Expect an increase in available capital for single-family rentals (SFRs) and build-for-rent communities this year. Construction financing will be accessible for strong projects backed by well-capitalized sponsors. There is a big push nationwide toward renting versus buying, which makes lenders and equity providers confident in the space, as this is leading to a significant demand from consumers. Supply has slowed because of financing constraints and less new product has been built over the last few years. More

Retail borrowers will see more available capital as lender appetite will be stronger this year. Many point to retail as a top asset class since multifamily and industrial both face some hurdles. Lenders are confident in the fact that rents have been up across the board. Retail has seen an increase in rents and decrease in vacancies, along with massive demand. There is also limited new supply entering the market. Grocery-anchored centers will continue to see the most attention, although watch for lenders to start looking at other retail properties this year. More

Multifamily lending will be more borrower friendly during the second half of the year as rates start to come down. Lower rates will help spur activity and simultaneously reduce the impact of the large pool of loans set to mature with current rates at least 1.5% below the current interest rate environment. Look for a continued focus on strong sponsors and well-performing markets, with the agencies reclaiming their historical market share levels. While banks and life companies will be some of the most attractive options, CMBS lenders will become more popular because of decreased spreads. More

Expect bank lending to continue on the same trajectory during the first two quarters this year, with some improvements in Q3 and Q4 following the Federal Reserve lowering the overnight lending rates. As the year progresses, more and more banks will re-enter the market for new borrower relationships. Banks will especially be drawn to acquisitions with fresh equity coming in and where there is a resetting of the property value. Refinances will be more challenging because of higher rates. Banks will be really focused on sponsorship and borrower relationships. More

Land lending will improve as rates begin to decline later this year, making take-out construction financing more viable. Expect more available capital as the year progresses with interest rates declining. Keep an eye out for more lenders entering the market as things improve. The majority of unentitled land deals will have to be with the debt funds as some banks remain on the sidelines. More

Expect self storage to be a favored asset class this year. There is a need for self-storage space in many markets and occupancies are not expected to soften anytime soon. Lenders like the fact that this property has consistent demand throughout the good times and the bad. Self storage is still one of the top performers in the commercial space with very few losses experienced by lenders. Certain markets could experience some overbuilding, but lenders will work to keep developers in check and lend to markets that show a need for additional space. More