In the last three years, commercial property lending has continued to gain momentum and it is fundamentally strong, while still maintaining disciplined underwriting standards. The fundamentals of the real estate markets also are improving via the growth in the housing markets, construction, industrial production, and the further strengthening of the consumer psyche. The convergence of these factors leads us to an optimistic 2014 forecast for the real estate lending markets. Banks now trust the improved value of real estate again, which results in increased lending competition that should keep spreads tight and fuel strong performance up the risk curve to broader geographies and asset types this year. To learn more, visit: http://www.us.jll.com/capitalmarkets

1. Northeast debt and
equity market

2. Northeast debt
and equity market
Within the Boston market, increased
competition from all sectors of lenders
(commercial banks, CMBS, life companies,
debt funds and bridge lenders) is creating
an environment of modestly compressed
spreads and leverage thresholds for nonrecourse lending are beginning to tick
upward. We are now seeing non-recourse
construction financing on multifamily, office
and luxury condominium development in
isolated circumstances. Boston traditionally
does not see a high volume of Class A,
trophy assets trade and, therefore, lenders
are increasingly becoming more aggressive
on downtown Class B assets and stronger
suburban markets. In 2014, we expect
CMBS lenders to take a larger piece of the
lending pie across all property types. We
anticipate isolated instances of speculative
lending as well.
Jones Lang LaSalle

3. Northeast debt
and equity market
Lenders continue to rely on strong, proven
sponsorship and focus on seasoned
markets. In these instances, debt and equity
are plentiful. Tertiary markets are continuing
to be financed by local lenders. Debt capital
remains strong and all indications are that it
will remain so throughout 2014.
Jones Lang LaSalle

4. Northeast debt
and equity market
As commercial lenders remain more
conservative in terms of leverage levels,
debt yield and location, CMBS is filling
a needed void. The largest increase in
CMBS originations are occurring in the
stronger suburban markets. Leverage
levels are typically in the 70-75 percent
range. Increased competition is allowing
for some structural flexibility and increased
interest-only periods. More and more
CMBS lenders are holding some structurally
challenged assets on balance sheets for
future conversion to securitization. On
the positive side, CMBS allows for higher
leverage debt in B-markets, typically up to
75 percent LTV and a 9 percent debt yield.
However, on the flip side, more and firms are
servicing their own loans; but there remains
little flexibility as situations arise. The level
of documentation and level of review by
B-note buyers and rating agencies has
created a more arduous closing process.
Jones Lang LaSalle

5. Northeast debt
and equity market
Institutional capital (domestic and
international) continues to focus on
Boston based on its strong Education,
Medical, Life Sciences and Innovation
industries. More and more equity sources
are searching for well-located luxury
condominium opportunities given Boston’s
near two-month supply of housing
inventory. From 2012-2013, international
investors, in particular, have invested
$1.6 Billion in Boston, predominantly in
the office sector. Switzerland, Norway,
Canada and Germany have led
the way.
Jones Lang LaSalle

6. Jonathan Schneider
Senior Vice President
Jones Lang LaSalle’s Capital Markets
Jonathan.Schneider@am.jll.com
+1 617 531 4119
Download the complete report
Debt and equity availability update:
The guide to financial commercial real estate
Jones Lang LaSalle