Fundamentally Speaking: Signs of Recovery in Lending

In the latest edition of “Fundamentally Speaking,” Calvin Schnure, NAREIT’s vice president of research and industry information, discussed the latest developments in the commercial lending market.

“We’ve actually seen a significant turnaround, just in the past couple of months, for the first time since the crisis,” Schnure said. “One of the easiest ways to see this is to look at the [Federal Reserve’s Senior Loan Officer Opinion Survey] that came out very recently. It showed almost half of banks are reporting increases in demand for commercial mortgages. That’s not saying that they’re seeing a lot of strong demand, but we’re seeing widespread increases in demand for commercial lending.“

Schnure noted that the demand for loans, as well as the supply of credit, supports the idea of a health recovery continuing in the sector.

“It’s a sign that we are beginning to see the foundation for a real, sustainable recovery in commercial real estate,” Schnure said.

Schnure also discussed REIT activity in the debt markets.

“Surprisingly, the REITs have slowed quite a bit over the past couple of months,” he said. “REITs have had fairly strong issuance of debt in the first and second quarters, but in June and July, they were about half the pace of what they had been the previous three months.“

Schnure shared his opinion regarding the outlook for the commercial mortgage market, as well as commercial real estate overall.

“We’re seeing a disappointing, slow recovery, but it’s less disappointing as we go along,” Schnure said. “The macro-economy is showing a bit more strength. We’ve had still mixed news—the employment report for July showed job growth was a bit weaker, but we’re seeing stronger signs of overall GDP growth. We’re seeing quite a good improvement in the housing market. The consumer sector is holding in there fairly well. We’re seeing a good picture for a recovery in the macro-economy. That means that people are going to need more space for their businesses. We’re seeing some improvement in commercial real estate markets. The multifamily market is the real exception—that has been outstanding for quite a while.”