Lenders Will Prefer Multifamily This Year: JLL Survey

Dees Stribling, Contributing Editor

Las Vegas–Lenders are predicting that commercial real estate loan volume in 2010 will outpace that of last year by a considerable margin, according to the Jones Lang LaSalle’s annual 2010 Lenders’ Production Expectations Survey. Forty-three percent of respondents expected their loan production to range from $2 billion to $4 billion in 2010, compared with only 21 percent who thought so a year ago.

Moreover, more respondents (27 percent) said that they will single out multifamily for their loan dollars than any other property type, while another 21 percent said they will focus on the office sector in 2010. The hotel sector stands out as the space in which lenders are least likely to lend, though a few contrarian lenders indicated an interest in hotel investments because they believe the sector is at rock bottom.

A similar anticipated lending pattern for 2011 emerged from the survey. During that year, 25 percent of respondents say they plan to reserve a majority of their lending dollars for the multifamily sector, with 21 percent putting their money into the office sector.

In another encouraging metric, the number of lenders expecting to lend more than $4 billion jumped from 9.3 percent in 2009 to 15.2 percent in 2010. The survey also confirmed that lenders plan to keep extending loans associated with high-quality assets whose main problem is a refinancing deadline in the near future. More than two-thirds of life company respondents, for example, estimated that 40 percent to 60 percent of their portfolios will be allocated to the refinancing of maturing loans.

“Lenders we spoke with say they’ll be giving borrowers 24-plus month extensions in order to avoid foreclosure on high-quality, well-located assets,” said Bart Steinfeld, Jones Lang LaSalle’s managing director of the real estate investment banking practice, in a statement.

That’s not going to be the case for all loans, however. “Many financial institutions don’t want to hold on to assets and now are coming to terms with the fact that they can no longer ‘extend and pretend,’ ” noted Steinfeld. “They’re now realizing it makes good sense to move these assets off their balance sheets to create greater ability to originate loans this year.”

Jones Lang LaSalle’s survey, which was administered directly to 60 nationwide lenders through a face-to-face questionnaire, included a mix of insurance companies, CMBS dealers, private equity lenders, commercial banks and government agencies. It was conducted over several days during this month’s Mortgage Bankers Association’s Commercial Real Estate Finance/Multifamily Housing Convention and Expo in Las Vegas.