A few years ago, some investors were scrambling to find sources of capital as banks and lenders were reluctant to fund projects. Fortunately, a new age of more stringent underwriting by banks and other lenders combined with greater diversity in sources of commercial real estate capital has helped ignite a rush of confidence among CRE executives. The 6th annual Akerman U.S. Real Estate Industry Outlook Survey recently found that nearly 60% of real estate executives are more optimistic about the market this year than they were in 2014.
Nearly half of the executives interviewed predicted that banks will drive commercial property financing over the coming year, and for the first time since 2011 they indicated that insurance companies will also be a main source of real estate financing. Foreign capital, already funneling equity into U.S. property deals, will also be a key driver of growth in the financing space as well.
Craig Barrett, co-founder of NBI Properties in Fort Walton Beach, said the days of searching for alternative sources of financing are over.
“During the recession, we worked with a lot of investors who were frustrated by traditional lenders and banks,” he said. “We had to get creative and look for other sources of capital, but now the tables have finally turned and it’s much easier to obtain funding for developments and projects.”
A surge in institutional capital is leading deal volumes, with an upward trajectory predicted in 2015. However, executives believe that foreign capital will continue to pour into the U.S., and CMBS, private equity, REITs and pension funds will serve as sources of an even greater volume contributed through non-traditional investment vehicles. More than half, or 58%, believe multifamily will continue to lead CRE through the recovery. Seven out of 10 agree apartment development will drive multifamily activity.
Executives also said the single-family homebuilding market will be the second most active real estate sector at 10%, followed by hospitality, retail, industrial and office.