During 2014, commercial real estate capital availability continued growing, building on the tail winds from 2013. Major capital providers found new energy in revitalized commercial markets and competed for deals, leading to steep acceleration in prices for some property sectors, especially apartments and CBD office buildings.
On the debt side, national banks accounted for the bulk of capital providers, riding the wave of low interest rates and offering low cost floating rate lending. According to CBRE Research, national banks increased their market share to 37 percent in 2014 from 32 percent in 2013. Government-sponsored enterprises (GSEs) were the second largest debt originator, dominating the financing in the multi-family segment. CMBS conduits and life insurance companies also increased their originations. Life insurance companies accounted for 26 percent of the debt universe, while CMBS originators represented 24 percent of debt financing.
On the equity side of CRE financing, private equity accounted for 44 percent of capital, followed by listed and non-listed REITs, which made up 34 percent of financing in 2014, according to Situs RERC. Pension funds, both domestic and cross-border were the third largest capital provider group, representing 15 percent of the equity market. The remainder groups comprised of corporations, commercial banks, foreign investors and others.
Based on NAR’s 2015 survey data, the capital picture displays a fundamentally different landscape. Local and community banks were the largest lending group in REALTORS®’ commercial markets in 2014, accounting for 32 percent of transactions. Local and community banks gained market share from 2013, when they made up 30 percent of the market.
The second largest capital source in 2014 comprised of regional banks, which captured 26 percent of REALTORS®’ commercial deals, a slight increase from the 23 percent in 2013.
Private investors were the third main capital providers, accounting for 11 percent of deals during 2014. National banks came in fourth place, with 7 percent market share. The Small Business Administration and credit unions made up 6 percent and 5 percent, respectively, of transactions. Life insurance companies were much less active in REALTOR® markets, representing 3 percent of deals, while CMBS conduits accounted for only 1 percent of funding, tied with REITs and public companies.
For more information and the full report, access NAR’s Commercial Lending Trends 2015 at http://www.realtor.org/reports/commercial-lending-trends-survey.