A Look at Capital Currents in Commercial Real Estate: Finance Lobby’s Perspective on MSCI Report
The tides of capital availability are pivotal for both seasoned and aspiring investors. As a hub that bridges the aspirations of brokers and the prowess of lenders, the team here at Finance Lobby continually seeks to decode market trends to pave a smoother path for financing various commercial real estate projects.
This recent report by MSCI Real Assets sheds light on the current state of commercial real estate debt, offering a glimpse into the capital availability trends and how they interlink with broader economic indicators.
The MSCI Real Assets report unveils a mixed bag of trends. On the bright side, debt continues to flow towards major property types, albeit under tighter terms, reflecting a prudent lending atmosphere.
The ongoing refinancing activity holds a silver lining, trending above the levels seen between 2015 and 2019, with lender losses on defaulted loans averaging below the previous marks. This suggests a level of resilience within the industry amidst the slow-paced investment sales activity and looming interest rate hikes.
While construction activity showed tenacity, investment sales volume witnessed a significant 60% drop year-over-year through August 2023. Particularly, the apartment and office sectors recorded steep declines in sales volume.
One can’t overlook the tightened loan terms, notably the decline in Loan-to-Value (LTV) ratios on apartment and industrial loans. The shift in loan origination terms, marked by a rise in interest rates to 6.8% by the end of Q2 2023, underscores the evolving lending landscape.
Although financing is still attainable, the era of exceptionally favorable terms seems to be on a pause.
Seller financing has slightly edged up, accounting for 1.9% of all commercial real estate lending in the first half of 2023, up from 0.5% in the same period in 2022. This uptick may hint at the market’s adaptive mechanisms amidst a tighter lending scenario.
Moreover, with over $400 billion in commercial property loans set to mature in the latter half of 2023, the clock is ticking for a sizable portion of market players.
The composition of these loans, spanning across CMBS loans, bank loans, investor-driven loans, and CLO loans, paints a diverse picture of the market’s debt structure.
Navigating the currents of commercial real estate debt requires a reliable compass. Finance Lobby is committed to empowering brokers and lenders with the right connections and insights to traverse these financial waves. Whether you’re a broker seeking financing for your projects or a lender eager to finance promising deals, signing up with Finance Lobby is your gateway to forming fruitful collaborations amidst a dynamic market landscape.
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