Los Angeles, CA – February 14, 2017 – Commercial real estate lending volume finished the year on a strong note as loan closings surged in November and December, according to the latest research from CBRE.
Despite concerns throughout the year regarding the direction of the global economy, U.S. capital markets remained favorable to borrowers in Q4 2016 due to low relative rates and abundant capital.
The CBRE Lending Momentum Index, which tracks the pace of U.S. commercial loan closings, reached a value of 266 in Q4 2016, the highest level on record. This represented a 37% increase from the Q3 2016 level, as well as from the prior year.
Life companies led all other major lenders in Q4 2016 and increased their share of loans closed by CBRE Capital Markets, accounting for more than 34% of non-agency commercial loan closings. This is up from 25% in Q3 2016 and above the 23% share recorded in Q4 2015.
After a strong start during the first half of the year, bank lending continued to cool. Banks accounted for 27.7% of loan volume in Q4 2016, compared with a 42.7% share a year earlier. Many key bank interest rates and spreads have not been materially impacted by the recent increases in Treasury rates. However, bank construction lending remains limited and banks are still affected by stiff regulatory oversight.
“The commercial real estate lending market has shown its resilience throughout the course of the year which made for a stellar end of 2016. Life companies and several other capital sources have stepped in as attractive options for borrowers as banks continue to tighten their underwriting standards. We expect this momentum to carry into the early part of 2017 as we wait to learn more about the policies put in place by the new administration,” said Brian Stoffers, Global President, Debt & Structured Finance, CBRE Capital Markets.
While CMBS conduit lenders increased their closings in Q4 2016, they continued to lag other major lending groups by a considerable margin. CMBS lenders accounted for 13.5% of non-agency lending volume in Q4, up slightly from their 11.5% share recorded a year earlier. Overall industry-wide CMBS production was down in 2016 as issuers grappled with a poor spread environment early in the year and with ongoing regulatory issues, including risk retention.
The “Other” lender category, which includes REITS, private lenders, pension funds and finance companies, continues to provide a significant amount of bridge, permanent loan and construction financing, filling the gap left by banks. They accounted for 24% of non-agency lending volume in Q4 2016, up from 14.5% in Q3 2016.
To request a copy of the February 2017 edition of CBRE’s U.S. Lending MarketView Snapshot or to speak with a CBRE expert, please contact Ayana Miller (+1 212 9846506 or email@example.com).
About CBRE Group, Inc.CBRE Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (based on 2016 revenue).The company has more than 75,000 employees (excluding affiliates), and serves real estate investors and occupiers through approximately 450 offices (excluding affiliates) worldwide. CBRE offers a broad range of integrated services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services. Please visit our website at www.cbre.com.