Is Commercial Funding Getting More Flexible or More Conservative?

Question

It feels like commercial lending has shifted over the past few years. Some structures seem more creative while others are tightening. From your experience, are commercial funding options becoming more flexible — or harder to secure?

Nick Belsky · Answer

@Tracy Thielman

I don't think much has changed in the CRE lending space over the past few years.  We work with dozens of different resources simply because investors appetites change ALL THE TIME.  That's a normal part of the CRE business.  Markets shift up and down, collateral risks stagnate or change, and different investors perceive risk differently during all of these variances.  Having a network of reliable capital is key to keeping deals funding throughout the various economic climates.  It is all about whom you know.

Multifamily residential is its own animal and with the recent administration changes with commercial agency, those programs have definitely loosened up a tad, especially on the experience requirements.  However, MF5+ that doesn't fit in the agency or institutional boxes are still not favorable loans as they tend to be in the 7-9% range compared to agency/institutional in the 5-6% ranges.

Cheers!

Doug Smith · Answer

One thing that I have seen is a concern from banks and lenders over CRE (multi-family, office, retail) operating costs increases (increasing taxes, insurance, etc) vs the increased in market rents. That concern has lenders more conservative on CRE as they feel a property that might cash flow well now might not a couple of years down the road. If the rise in costs outpace the rise in rental rate, then what seems to be a good deal by today's numbers might be a ticking time bomb. That's one sector I've seen some concern over.

Mike Grudzien · Answer

It's all in the numbers.

Is Commercial Funding Getting More Flexible or More Conservative?

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