During 2013, commercial real estate witnessed a noticeable reversal in capital availability. Following exceedingly stringent capital standards and overly tight liquidity in the wake of the 2008 recession, funding sources broadened. The trends accelerated during 2014, as most major capital providers returned to the markets and actively competed, leading some investors to express concern about an overabundance of capital chasing too few deals in some markets.
For commercial REALTORS®, the main sources of funding in 2014 mirrored the trends of the past couple of years. Local and community banks were the largest source of lending, accounting for 30 percent of deals. Regional banks were the second largest provider of CRE loans, with 23 percent of transactions. Over the 2013-14 period, regional banks increased their share of the market. Private investors provided 10 percent of funding for REALTOR® deals, followed closely by the Small Business Administration, at 9 percent.
National banks were a much smaller source of CRE lending in REALTOR® markets, accounting for 8 percent of total. Credit unions and insurance companies comprised close to one-in-ten loans. Lending sources also included international banks, REITs and CMBS, but only in a small fraction of transactions.
Underscoring the importance of the banking sector as a source of funding, 64 percent of REALTORS® indicated that bank capital for commercial real estate remains an obstacle to sales. When asked about the main causes for the lack of bank capital, 27 percent indicated that legislative and regulatory initiatives proved the main stumbling block. Another 22 percent pointed to the U.S. economic uncertainty as an underlying factor.
For more details on lending conditions in REALTORS® markets, visit: http://www.realtor.org/sites/default/files/reports/2014/commercial-real-estate-lending-survey-2014-10-08.pdf.