CRE Lenders Express Disappointment in 2014, Optimism for 2015

This announcement was originally appeared in the Scotsman Guide on January 2, 2015. 

Commercial mortgage lenders were largely unhappy with their loan volume in 2014, but are more optimistic about what’s in store for commercial lending in 2015, according to the results of the 2015 Commercial Real Estate Lending Outlook Survey, conducted jointly by Scotsman Guide Media and the Small Business Finance Institute (SBFI).

About 60 percent of commercial lenders reported dissatisfaction with their 2014 funded-Scotsman Guideloan dollar volume, the number of funded clients they had in 2014 and the ratio of funded loans to applications they saw.

“Although much has been gained back from the industry-wide devastation that came out of the recession, the 2015 survey reveals that few mortgage professionals believe the industry has fully recovered,” commented Charles H. Green, managing director of the SBFI.

“But the underlying sense of optimism in [the responses] points to cautious belief that 2015 may be the turnaround year,” said Green.

On the optimistic side, 80 percent or more of respondents felt that 2015 would bring more funded-loan dollar volume, more clients and/or a better ratio of funded loans to loan applications.

Lenders are also optimistic about the economy. Perhaps preparing for an increase in business in 2015, 43 percent of respondents reported that their company plans to increase hiring to facilitate more loans. Additionally, 67 percent expect the U.S. economy to grow in 2015.

About half of the respondents felt that a combination of three factors — restrictive credit, depressed demand and appraisal value — could hold back commercial lending in 2015. Of these factors, restrictive credit was the most feared, with nearly a quarter of respondents predicting it would slow commercial lending.

The 2015 survey, conducted this past October through November, covered the 2014 business year. More than half of the respondents described their business environment as “competitive” or “intense[ly] competitive.” The average amount of experience among respondents was 19 years.

Commercial lenders were also more optimistic this year than they were in the 2014 Commercial Real Estate Lending Outlook Survey. In the 2015 survey, 34 percent were Small Business Finance Institutesatisfied with the year’s funded-dollar volume, but only 29 percent reported satisfaction in the 2014 survey.

Eighty-nine percent reported in the 2015 survey that they expect funded-loan dollar volume to increase in 2015; only 82 percent felt similarly going into 2014.

There was a jump in respondents who expected the ratio of funded loans to applications to increase: 81 percent in 2015 compared to 64 percent in 2014.

Lenders may have more than confidence to back their optimism about 2015. Multifamily development is expected to continue to surge in 2015, and analysts expect industrial to grow when retailers seek warehouse space to fulfill consumer demand. In December, the Mortgage Bankers Association reported that commercial mortgage debt grew $28.6 billion this past third quarter, lifting total debt to the highest level since the end of 2007.

“Will 2015 be the breakthrough year for commercial real estate lending?” Green said. “Only time will tell, but this year’s survey suggests that commercial mortgage professionals are ready to make the most of this year’s opportunities.”

A detailed breakdown of the survey questions and results can be found at SBFI,org.

This entry was posted in AdviceOnLoan, CRE, SBA
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