For most commercial REALTORS®, investment activity registered slight improvements over the past year. Members posted gains in transactions of office properties, which took the top spot. Industrial, multifamily and retail/land deals followed close behind.
In terms of valuation, most properties exchanged hands at the $2 million mark and below. The figures indicate that a significant segment of the commercial market is flying below the radar of the established data aggregators, such as Real Capital Analytics. In addition, commercial REALTORS® handled a wide range of properties, from free standing buildings and mixed use, to churches, restaurants and self-storage.
The 2013 Commercial Real Estate Lending survey points to the fact that capital availability has shown signs of easing, but tight lending standards remain the norm in many markets. In 2012, only 31 percent of respondents indicated that capital availability had eased, compared with 70 percent who reported shrinking or unchanged availability. Over the same period, 72 percent of commercial REALTORS® indicated that loan underwriting standards are just as stringent, or tighter than in 2011.
Cash remained a dominant source of financing, accounting for 33 percent of transactions, an increase from the 27 percent figure in 2011. Down-payment conditions remained conservative—71.0 percent of closed sales required a down-payment larger than 20% to secure financing, with 21.0 percent of loans requiring 50%-60% loan-to-value ratios.
Marking a noticeable improvement from last year, 52.0 percent of commercial REALTORS reported having a sales transaction fail due to financing issues (compared with 70.0 in 2011). In addition, 42.0 percent of REALTORS mentioned that they or their clients failed to complete a refinancing process during the past 12 months. Much of this seems to stem from the fact that 72.0 percent of loan underwriters had standards which were just as or more stringent than the prior year.
When asked about the most relevant causes for lack of sufficient bank capital for commercial lending, REALTORS pointed to a twin salvo of reasons: regulatory uncertainty for financial institutions and new and proposed legislative and regulatory initiatives. Reduced NOI, property values and equity came in a close second.
For the full report of the Commercial Lending Survey, visit http://www.realtor.org/reports/commercial-lending-survey.
After several years of drought, the lending spigot opened a little wider during 2012, as every lender group upped its volume. With asset valuations rising and record low interest rates, lending provided a firmer foundation for investment deals. The lending landscape became more balanced as multiple sources competed for deals – commercial banks and CMBS posted the strongest yearly growth rates, taking market share from government agencies and insurance companies.
National banks, which retreated from commercial markets in the wake of the recession, have been finding conditions favorable and re-entering the market. During 2012, national banks made up 16 percent of the market, a four percent increase from 2011, according to data from Real Capital Analytics. Regional banks also added to their portfolio of commercial real estate loans, spelling good news for properties and deals in secondary and tertiary markets.