U.S. Commercial Lending Index Increases 10.8 Percent in Q2
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According to recent research by CBRE, commercial credit markets strengthened in the second quarter of 2021, reflecting the general economic recovery, with growing risk appetite among borrowers fueling demand for transitional financing such as bridging loans.
The CBRE Lending Momentum Index, which tracks the pace of CBRE-borne commercial loan closures in the US, stayed strong mid-year, hitting 256 – up 10.8% from March 2021 and now just 1 ,8th %. below its pre-pandemic end in February 2020. Compared to the previous year, when lending fell sharply due to the COVID-19 pandemic, the index is up 47.3%. Lending activity reached its most recent low in September 2020 with an index value of 160.
“The growing risk appetite of borrowers has fueled demand for transitional financing such as bridging loans. As a result, alternative lenders led the way in 2nd said Brian Stoffers, Global President of Debt & Structured Finance for Capital Markets at CBRE.
CBRE’s Lender Survey shows that activity from alternative lenders such as loan funds, pension funds and lending firms increased in the second quarter of 2021, accounting for nearly 39% of all loan deals – up from 30.6% in the first quarter of 2021 and 6.5% in the second quarter of 2020. Bridging loans to help borrowers stabilize their properties accounted for more than 80% of alternative lender closings in the second quarter of 2021.
Banks accounted for 24.3% of the total loan volume in the second quarter of 2021 and fell from their top position in the first quarter of 2021. Regional and community banks were the most active. Construction loans accounted for 46% of banks’ lending volume in the second quarter of 2021, largely due to growth in industrial and apartment building development.
Life insurance companies accounted for 22.7% of commercial mortgage loans in the second quarter of 2021, up from 19.2% in the first quarter of 2021, and made competitive offers on multi-family fixed and selectively adjustable rate mortgages. Despite some concerns about their second half mortgage assignments, life insurance requests for loans have been strong in recent weeks.
As a sign of their more competitive rates, CMBS lenders issued 14.3% of commercial mortgage loans in the second quarter of 2021, up from 11% in the first quarter of 2021. The industry-wide CMBS issuance totaled $ 45.7 billion from June to June , up from $ 30 billion for the same period a year ago. The single asset single borrower market (SASB) was particularly active and offers efficient financing for larger transactions and portfolios.
While the subscription criteria for Q2 2021 were generally in line with Q1 2021, the subscription limits and bond yields increased slightly. The proportion of loans with full or partial interest rate fixation fell for the second quarter in a row to 54.2% from 60.6% in the first quarter of 2021, which is due to a higher proportion of amortizing non-agency loans. The average over the past two years is 63%.
