What Do Lenders’ Decisions Tell Us About the Future of Various CRE Sectors?November 9, 2020 – Article
Greenberg Glusker Real Estate Partner, Steven J. Lurie, discusses the financing climate in commercial real estate in the article he penned titled, "What Do Lenders’ Decisions Tell Us About the Future of Various CRE Sectors?," published by National Real Estate Investor on November 9, 2020.
Amongst a global pandemic, social and political unrest and wide-scale economic disruption, 2020 has been a roller coaster of a year that many real estate investors would like to forget. It may be difficult to recall, but it didn’t start out this way.
The beginning of 2020 was a favorable environment for borrowers. Lenders had lofty production goals and were actively competing for deals, leading to compressed spreads. At one point—in February until the beginning of March—borrowers could secure loans with interest rates in the mid-2 percent range given the sizable dip in the 10-year Treasury.
Of course, the lending and borrowing landscape changed radically after the pandemic took hold in the U.S., leading to the shutdown of huge swathes of the economy in late March. Most lenders pulled back significantly. While select commercial real estate loans were still available for top sponsors, valuations became much more conservative. Lenders began imposing interest rate floors in the high 3 percent to low 4 percent range. Many developers put projects on hold due to the uncertainty in the economy and conservative underwriting criteria of lenders.