Here’s how CRE lending is shifting due to coronavirus

property values
property values

By Adam Finkel |AZBigMedia

It seems that there has been a shift in the past week from a focus on flattening the curve to how we begin to open up society and the economy again. Although there may be some signs for optimism given the recent stock market rally and new medical data suggesting the infection rate is slowing, the looming possibility of a second wave of infections will continue to keep the populace on edge. 

Liquidity Lies in Multifamily

The capital markets have evolved drastically in the past five weeks. Lenders have all but ceased operations as they manage assets, focus inward on their current portfolios and avoid originating any new loans. The CMBS market has effectively been shut down, while many banks have had to divert resources to manage the overwhelming demand for SBA loans. Financing for hotels and retail is essentially non-existent.

Demand, however, remains healthy for industrial and office projects in good locations with strong tenants. By far the most liquidity available is for multifamily, fueled by Fannie Mae, Freddie Mac, and HUD. Agency spreads have been reduced significantly from a few weeks ago, following the Fed’s announcement that it will buy unlimited amounts of Treasuries and agency mortgages, and remain an important source of financing for this asset class.

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