The commercial real estate financing market is facing numerous obstacles this year, ranging from the potential impact of newly implemented regulations to a likely shift in federal monetary policy to shifting solid fundamentals—and whether or not those changes will decrease demand for debt. There is also the rise of nontraditional, nonbank lenders in the marketplace to consider, as well as an incoming presidential administration that many believe will bring about policies beneficial to the overall economy but whose specific agenda remains notoriously hard to predict.
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“Although rates have risen modestly recently, if you look at the historical cost of debt on commercial property, the fact that you can borrow [at interest rates] in the high-4s, mid-5s is very low historically,” said Mark Jarrell, a corporate executive vice president and the head of portfolio lending and commercial mortgage-backed securities at Greystone. “I don’t think higher interest rates will be an impediment to the market, because while rates might be higher today than they were six months ago, they’re still very near historic lows.”
Higher borrowing costs would also be more than manageable in a stimulated, growing economy—and that is exactly what many, on both the borrowing and lending sides, are expecting under President-elect Donald Trump’s incoming administration.
“In general, our view [for the economy next year] is really rosy,” Jarrell said. “No matter how you feel about the election and how it turned out, it’s pretty clear that sentiment is good about the state of the U.S. economy and near-term future of the U.S. economy.”
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