Small Banks Are the New Property Titans
The CMBS market slows down, and regional and local lenders fill the gap.
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Local and regional banks, chasing higher-yielding investments, have ramped up lending to commercial real estate developers. While they're filling the gap left by a decline in commercial mortgage-backed securities offerings -- until recently the main funding source for commercial real estate -- the opportunity is also risky for the smaller players.
In the first half of 2016, 41 percent of real estate financing in the U.S. came from national and regional banks, up from 25 percent two years earlier, according to data released last week by real estate data firm Real Capital Analytics. Conversely, the CMBS market saw its share of commercial real estate funding decrease from 30 percent to 10 percent in that same period.