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Despite Recent Equity Market Volatility, Commercial Debt Markets Remain Strong

Commercial lending activity was strong in the final quarter of 2018, despite recent equity market volatility, according to the latest research from CBRE. Banks and alternative lenders maintained a strong origination pace in Q4 2018, similar to the previous quarter.

The CBRE Lending Momentum Index, which tracks the pace of commercial loan closings in the U.S, highlighted the continued strength of commercial real estate lending markets in Q4 2018, reaching 253, up 13.6% year-over-year.

CBRE’s Brian Stoffers says, “Despite recent equity market volatility, commercial real estate has weathered the storm well. Many banks and life companies have ample capital to allocate toward commercial mortgages. Alternative lenders have raised record amounts of capital for secondary finance and transitional property lending. The agencies have maintained their loan purchase goals for 2019, which will continue to support liquidity in the apartment sector.”

CBRE reports banks accounted for more than 38% of non-agency lending volume in Q4 2018, up almost 10 percentage points year-over-year. Banks have benefitted from clarification of high volatility commercial real estate (HVCRE) rules and remain active across many market segments.

Alternative lenders, including REITS, finance companies and debt funds, accounted for 25.3% of loan closings in Q4 2018, up from 20% a year ago. Large amounts of private equity capital have been raised to deploy in secondary finance, construction and bridge loans. As a result, CBRE notes origination activity has picked up in recent months.

The performance of life companies improved in Q4 2018, accounting for 22.7% of total volume, compared with 14.5% in Q3 2018. Life companies’ share of the market was down from 30.4% a year ago.

CMBS conduit originators accounted for 13.4% of non-agency loan production in Q4 2018, down slightly from Q3 2018 and down from more than 20% of the market a year ago. CMBS issuance totaled $77 billion for the year, down from $87.8 billion in 2017, with lower refinance activity one factor that accounted for the reduced issuance.

Overall average LTV ratios were slightly lower in Q4 2018, reports CBRE, while debt yields and underwritten cap rates rose.

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About Dennis Kaiser

Dennis Kaiser is Vice President of Content and Public Relations for Connect Commercial Real Estate. Dennis is a communications leader with more than 30 years of experience including as a journalist and in corporate and agency marketing communications roles. He is responsible for Connect’s client content operations and is involved in a range of initiatives ranging from content strategy, message development, copywriting, media relations, social media and content marketing services. In his most recent corporate communications roles, he led a regional public relations effort across Southern California for CBRE, played a key marketing role on JLL’s national retail team, and was responsible for directing the global public relations effort at ValleyCrest, the nation’s largest commercial landscape services company. In addition to his vast commercial real estate experience, Dennis has worked on communications and launch strategies for a number of residential projects such as Disney’s Celebration in Florida, Ritter Ranch in Palmdale California (7,200 homes, 22,000 acres), WaterColor in Florida and PremierGarage in Phoenix. Dennis’s agency background included firms such as Idea Hall and Macy + Associates. He has earned an outstanding reputation with organization leaders as a trusted advisor, strategic program implementer, consensus builder and exceptional collaborator. Dennis has developed and managed national communications programs for Fortune 500 companies to start-ups, both public and private. He’s successfully worked with journalists across the globe representing clients involved in major-breaking news stories, product launches, media tours, and company news announcements. Dennis has been involved in a host of charitable and community organizations including the American Cancer Society, Easter Seals, BoyScouts, Chrysalis Foundation, Freedom For Life, HOLA, L.A.’s BEST, Reach Out and Read, Super Bowl Host Committee, and Thunderbirds Charities.

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