Commercial real estate financing is always in flux. Sometimes it is new products flowing into the market and disrupting expectations that causes the change. Other times, it’s just shifting demand for different property types or a consumer preference for a specific lending product because of other economic factors. Whatever is causing those winds of change to blow, it’s a good idea to keep an eye on them so you know when they shift.
2022 is an interesting year for financing because it is just about a decade and a half since the first moments of the great recession, and things have changed a lot. Here are a few important facts to consider about today’s market before applying for your next loan.
1. Banks Are Lending More Than Ever
There was a myth that banks were not lending after the great recession, but that was never actually true. While it’s true that commercial real estate financing was more difficult to get and that some products were no longer offered due to regulatory changes, banks continued to lend at volume. Today, banks are lending more than ever despite continuing to have strong criteria for loan candidates.
This is due to how profitable and popular the real estate market has become recently. What is new for banks is the competition. With more private lending options than ever, banks are now having to compete with programs that are more accessible and at least comparable in price, if not totally favorable.
2. Alternative Lending Is More Popular Than Ever
First-time investors and experienced professionals with multi-agent operations have both become more enamored of alternative lenders over the last half decade. This is due in part to the private lending industry’s move to offer products that more easily compete with bank loans when costs and application criteria are compared. They have also been innovating, producing more different options for financing commercial real estate than have ever been available before, including some products only found when you shop with alternative lenders.
3. CMBS Loans Are the It Product
Investors are very interested in backing commercial real estate loans again as the market rises to historic values in many places. As a result, more CMBS loans than ever are being written by both bank loan officers and private lenders. That presents a tremendous opportunity for long-term financing because these loans offer discounts on interest in exchange for guarantees of full-term payment and penalties for early payment. If your investment plan calls for long-term income from a property, you could help your own monthly bottom line with the right loan choice.
