Commercial Real Estate

Real estate is a cyclical industry that is affected by both local and national economic conditions, including: growth in population and employment, consumer spending, interest rates, and inflation.

 

While macroeconomic conditions are important factors affecting the overall state of the real estate industry, local supply and demand conditions are by far the more important factors affecting real estate markets.

 

A bank's commercial real estate and construction lending may be targeted to one or more of the five primary real estate sectors, including: office, retail, industrial, hospitality, and residential (multifamily and 1- to 4-family).

 

Each of these market sectors has its own characteristics.

  • In the office sector, the demand for office spaced is highly dependent on white collar employment. Office space expansion generally lags economic recoveries.
  • In the retail sector, the demand for retail space and the level of retail rents are affected by the levels of employment and consumer confidence and spending.

  • The industrial sector is most susceptible to the level of consumer spending, inventory levels, defense spending, and the volume of exports.
  • The hospitality sector is affected by the strength of the U.S. dollar, consumer spending, the price of air travel, and business conditions. A weak dollar induces foreign visitors to travel to the United States, while prompting American vacationers to remain in the states.

  • Finally, in the multifamily residential sector, the demand for apartments is heavily influenced by the affordability of ownership housing, local employment conditions, and the vacancy of existing inventory.

Population growth is a key factor for all sectors of the real estate industry because it influences consumer spending and the demand for goods and services.

 

It also influences federal appropriations and state funding for local infrastructure projects and other services directly affecting real estate markets.

 

Changing demographics, such as increases in the level of immigrants or retirees, are also important factors affecting real estate markets.

 

Comptroller of the Currency
Administrator of National Banks

Comptrollers Handbook

 

The full text of the Comptroller's Handbook is available by clicking HERE. This book is dated, but contains valuable insight into the banking industry's protocol for lending (in normal times) on commercial property.

Spectrum Lending is interested in providing financing for:

  • Multifamily projects containing more than 8 units.
  • Land (developed or undeveloped) in close proximity to metropolitan areas.
  • Traditional office buildings.
  • Medical office buildings.
  • Shopping Centers of all types.
  • Hotels, motels and Inns.
  • Hospitals, nursing homes, assisted living centers, Ambulatory Surgery Centers.
  • Warehouse, office warehouse, office service, and mini warehouse projects.

Sponsors must have experience in the market segment in which the loan is to be made, or must be willing to joint venture (partner) with experienced sponsors.

 

Equity

 

No transaction on which real lenders will work today can be 100% financed. Equity participants are available for most transactions, and bridge financing may be substituted for equity in some cases.

 

Please allow us to determine the nature, scope and amount of equity that may be required on any given transaction.

 

If you own property with little or no financing that may be enough equity to complete a transaction.

 

See "Equity"