Commercial real estate loans – which went from a high of $230 billion in 2007 to just $3 billion two years later – are making a comeback as major bank players cautiously dip their toes back in the market, lured by more conservative underwriting and the perception that property values have bottomed out.
In the last month, there have been an estimated $5 billion in CRE loans generated on eight issues of commercial mortgage-backed securities. But lenders are still being choosy, with high occupancy, premier properties in major metro areas attracting lenders while smaller markets still struggle to find loans.
A senior managing director of CB Richard Ellis was quoted in a New York Times article as saying, “It really is a tale of two markets. There are those assets that have strong cash flow and there are those that don’t. Those that do will find a home in today’s market and have a robust relationship with lenders, insurance companies and conduits. And those that don’t, it’s almost as if you’re seeing them fall off a cliff.”
Leading issuers include JP Morgan Chase and the Royal Bank of Scotland; Citigroup said it is also poised to re-enter the commercial mortgage-backed market as investor response has exceeded supply.