So Who's Financing Commercial Real Estate?

by Doug Marshall, CCIM
Market Assessment

Last week I showed you who in 2009 was lending on apartments. If you did not read that post and would like me to re-send it, please contact me.

This week I have the final results of who was lending in 2009 on commercial real estate sales transactions. But first I must define what I mean by commercial real estate.

I am referring to investor-owned real estate (not owner-occupied) and the property type could be office, flex, industrial, retail or shopping center.

Last year there were 81 arms length commercial real estate sales that occurred along the I-5 corridor from Kelso, Washington to Eugene, Oregon including Bend that were $1,000,000 to $10,000,000 in size.

As was true with apartment lending, the lenders for commercial real estate sales were both surprising and predictable. 41% of all sales transactions were financed either by all-cash buyers, seller financed or private sources!

That’s huge!!!

This is a very real indicator of the lending crisis we are currently going through when traditional lending sources are not lending.

Another interesting tidbit is that 22% of all loans did not disclose any financial details. What’s with this?

My hunch is that these transactions were distressed sales. Either lenders foreclosed on borrowers or sellers sold under duress to buyers where loans were assumed.

Local and regional banks totaled 30% of the financing for commercial real estate sales. On the banking side of lending, there has emerged some very real winners as well as some very real losers. We’ve all heard about those lenders that have been taken over by the FDIC.

Another interesting statistic is that over two-thirds of Oregon banks were not profitable last year. However, 2009 proved to be very profitable for a small group of lenders both regional and local.

The key to borrowing these days is to know which banks are still lending and which ones have the most competitive rates and terms.

As was true with apartments, life company lending was virtually non-existent in 2009 with only 2 transactions. I keep hearing that the life companies are back but that has yet to be proven by the statistics.

Please contact me if you have any questions, or better yet, if you have need for a loan quote on your next transaction.