I think it’s fair to characterize the following transaction as a symbol of our current national office market boom. Gone, gone, gone are the days when lenders’ hands were tied and 30-40% minimum cash on the barrelhead was a necessity to get a deal done for an office building in a primary market. Today, leverage is back in a big way — at least in one such deal in Los Angeles reported by Globe St’s Kelsi Maree Borland.
New numbers from the Mortgage Bankers Association (MBA) tell a tale of heightened loan origination from commercial banks and life insurance companies to commercial property in 2012. Will 2013 mark the return of pre-recession levels of capital to commercial property markets?
Commercial/Multifamily Mortgage Bankers Originations Index published by the MBA shows commercial banks produced their highest loan origination volumes since second quarter 2008. Life insurance companies as a class “have origination volumes greater than before the recession while other lender types are still at below-recession levels” according to a National Real Estate Investor report.
The Commercial Real Estate 2Q Market Suvey shows market is stable and even improving in some areas of country. The survey provides an overview of market performance, sales and rental transactions.
NAR’s Chief Economist and Senior VP of Research Lawrence Yun notes the National Credit Union Association’s piece suggesting that credit unions are trying to pick up the slack left by our pinstriped friends the banks in the commercial credit market:
Commercial real estate loans are very difficult to obtain. The lack of government backing (outside of multifamily mortgages) and a higher capital charge on office, retail, industrial, and other commercial real estate-related mortgages have severely hindered credit flow and potential business deals. Moreover, the compliance costs related to the Dodd-Frank bill and the uncertainty regarding Basel III rules are said to be too burdensome for smaller independent community banks from lending on modest-sized loans. Large banks have enough legal staff to handle the compliance, but small banks do not.