Ever since the Great Recession, the financing available for commercial real estate was forever changed. Banks are still giving out loans for these projects, however, with much more caution than ever before. To fill the gap of what has been lacking since the approach to debt financing has changed, additional lenders have made themselves known.
Banks Are Still Involved
Commercial real estate activity has seen a spike recently as a result of these three key factors: lower interest rates, a higher demand for apartment units, and foreign interest in U.S. property. Despite being less risky, banks are still being careful not to give too many loans to one specific developer or area.
Alternative Lending Has Grown
In the past, alternative lenders were a route that no developers went because there was a stigma attached to them. In today’s industry, however, these lenders are now a crucial way to secure commercial real estate financing.
The Market Is More Divided
Currently, there has been a split in capital in commercial real estate – price leaders versus proceeds leaders. Price leaders are traditional lenders, who often offer lower rates to borrowers, and proceeds leaders are the non-traditional lenders, who can offer a higher lifetime value ratio.