As society has changed, so has real estate. Today, commercial real estate is a major portion of real estate investment, and even that has evolved over the last several decades. Here are four things that have changed commercial real estate.
Banks still lend for real estate projects.
In addition to still lending for real estate projects, traditional financial institutions are lending more than they previously did, even before the recession. Research suggests this is due to a few different factors:
- Lower interest rates
- Increased demand for apartment buildings
- Investment in U.S. property by foreign investors.
CMBS issuances have been increasing.
The CMBS lending has occurred amid a great deal of change in the industry, including rewritten lending regulations. These regulations raised concerns that banks would be reluctant to issue loans, but that fear has lessened significantly since 2016.
More alternative lenders are available.
Another significant change in lending has been an increase in alternative lenders. These lenders operate separate from traditional banks and have different requirements and terms for lending. In many instances, the requirements are laxer and terms more favorable, which has created opportunities for those who might otherwise be turned down for financing from traditional financial institutions.
Competition is increasing for lenders.
With an increase in alternative lenders, competition has emerged between alternative lenders and traditional financial institutions. This has forced traditional lenders to re-examine their requirements and terms in order to be more attractive to borrowers. However, due to the limited ability of traditional lenders to make changes, there is an increasing divide between traditional and alternative lenders in the industry.
Whether you are new to commercial real estate or have been involved for a long time, it is important to know how things have changed and evolved. Understanding these four changes can help you better understand how to invest in commercial real estate in order to strengthen your portfolio and achieve your financial goals.