In my last market assessment, I summarized some salient points in the 2010 commercial real estate forecast presented in Emerging Trends in Real Estate.
This publication is a joint undertaking by the Urban Land Institute and PricewaterhouseCoopers. It reflects the views of more than 900 real estate professionals and is considered one of the best researched real estate periodicals of its kind.
This week’s market assessment covers their predictions for commercial real estate financing for the coming year. Their forecast:
- Banks will become willing lenders only when they have more equity or more earnings. In the meantime, an increasing number of “zombie banks” will be on the sidelines. For 2010, it’s survival of the most liquid. Surviving banks will start to dispose of real estate owned.
- Hundreds of banks could fail, particularly regional and community banks with significant exposure to homebuilder, land and construction loans, resulting in government regulators packaging and selling more bad loans.
Those banks who will be lending will employ stringent underwriting to limit transactions. Sponsorship quality and longstanding, banker/borrower relationships will be the primary requirement to obtain loan approval.
- The CMBS market is described as a “huge time bomb” wrapped in a “ball of confusion.” Securitized loans will remain entangled in complex workouts of failed multi-tranched structures and many of these loans will go into monetary defaults before maturities because of borrower financial issues and lagging fundamentals.
As grim as this forecast is, I am beginning to see anecdotal evidence that the Portland lending market is turning a corner.
Since the beginning of the year I have talked with two local lenders who are actually hiring to beef up their commercial lending departments – Umpqua Bank and Northwest Bank. I’ve also talked with a couple other lenders who have loosened their loan underwriting standards a bit making it slightly easier to get a loan.
And then there are several other lenders who are talking like they are ready to come back into the market, which reminds me of the well known Texas saying, “Are they all hat and no cattle?” Who knows? We’ll have to wait and see.
No one has ever accused me of being Mr. Optimist but I believe our current lending environment is not all doom and gloom. We’ve got a long way to go before we reach a lending environment that approaches “normal” but I’m seeing baby steps in that direction.
Hang in there! There will be an end to this lending crisis.
Since the beginning of the year I have talked with two local lenders who are actually hiring to beef up their commercial lending departments – Umpqua Bank and Northwest Bank. I’ve also talked with a couple other lenders who have loosened their loan underwriting standards a bit making it slightly easier to get a loan.
And then there are several other lenders who are talking like they are ready to come back into the market, which reminds me of the well known Texas saying, “Are they all hat and no cattle?” Who knows? We’ll have to wait and see.No one has ever accused me of being Mr. Optimist but I believe our current lending environment is not all doom and gloom. We’ve got a long way to go before we reach a lending environment that approaches “normal” but I’m seeing baby steps in that direction.
Hang in there! There will be an end to this lending crisis.
