THE IMPACT OF SHIFTING LENDING STANDARDS ON CRE MARKETS
Lending Is Active, But Standards Are Changing
- Lending is generally available for most CRE assets, but the cost of borrowing is heightened
- CRE Loan-To-Value has dropped to the 50%-60% range, which is impacting transaction activity
CRE Performance Is Strong
- Typically, property distress and missed payments are the primary cause for tightening lending standards
- But as of 2Q, the CRE delinquency rate is still 0.84%, well below the nearly 9% level recorded in 2010
Fundamentals Are Sound, So Why Is Financing Difficult?
- Coming off major bank runs this spring; smaller banks have been trying to create additional liquidly in case confidence falls and sparks withdrawals
- The tightening being tied to banking risk, rather than CRE performance risk, is a positive sign for where CRE lending is headed moving forward
*Lending Standards through 4Q
Sources: Marcus & Millichap Research Services, Real Capital Analytics
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