March 10, 2017 (STLRealEstate.News) According to a report by the Mortgage Bankers Association, over $500 billion in commercial real estate loans were originated this past year, indicating a strong financial landscape for lending in the year ahead. The financing market has demonstrated sustainable, dependable growth we can expect to shape commercial properties financing starting today. Low interested rates, steady rental growth, and rising property values are increasing investor activity in commercial real estate, which is presently driving up loans to finance these investments.
Of course, with the beginning of every New Year, many are wondering what the future holds for commercial real estate financing. Some wonder if the market will continue this upward trajectory of increased lending activity, or will new legislation by our new president have an even bigger impact? Here are 3 major things to consider when pondering these questions:
1. Interest rates: These rates will remain low, at least in 2017, incentivizing borrowers to refinance their maturing loans in order to lock in lower rates. Though the Fed is going to raise rates this year, the effects won’t be felt for a few years.
2. Availability of capital: There will be a wide availability of diverse sources of capital that will increase lender competition in the year ahead. Strong market fundamentals, like low unemployment rates and increased property values, are fueling a boom in loan originations for commercial real estate assets. Based on these strong fundamentals, it can be assumed capital will remain strong in 2017.
3. CMBS Regulations: A new bill is requiring CMBS lenders to hold onto five percent of the loans they issue as opposed to being able to pass them off as bonds. In anticipation of this new law, many CMBS lenders are adopting more conservative underwriting standards as we speak.
Reading for financing in 2017? Take notice of these three upcoming factors.