Lenders shy from retail, bullish on industrial and multi-family

Commercial real estate lenders plan to target their capital in 2021 but “all lenders are bidding on deals,” survey finds

Western Investor
December 4, 2020

Industrial is a preferred asset investment. | Colliers
— Industrial is a preferred asset investment. | Colliers

While lenders may have taken a more cautious approach to 2021, capital for real estate is still expected to remain abundant, albeit more targeted in nature, according to the 2020 Canadian Real Estate Lenders’ Report from CBRE. There has been some moderation in market tone, but lots of liquidity remains and nearly all lenders are bidding on deals, albeit a bit more cautiously, the national survey found.

Nearly half of lenders are looking to reduce their 2021 lending budgets for retail, 34 .3 per cent for office and 28.6 per cent for hotel properties. But the survey found that 49 per cent of lenders plan to increase their exposure to industrial properties and a stunning 60 per cent are planning to increase lending in the multi-family market.

A significant number of lenders are still looking to maintain, or even increase, their budgets for most property assets.

For borrowers, this means that while financing capital is readily available, it might not necessarily come with the exact loan terms they want. Lenders have altered their real estate strategies, with most respondents applying tighter lending discipline as well as improved property type selection in their underwriting. However, an important note is that the pandemic has not forced many lenders to wholly exit secondary markets, refuse new borrowers or outright reduce their real estate lending loan books.

Despite the economic environment, very few lenders are looking to decrease their real estate lending allocations in 2021, the survey discovered. In fact, 57.1 per cent of lenders are looking to maintain their existing real estate allocations with 40 per cent aiming to further increase allocations in 2021. While the majority of lenders are expecting to deploy 10 per cent of net new capital over the next year, one in five lenders had plans to add 30 per cent or more net new capital to the market, the survey found.


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