According to new survey data recently released by Ladera Ranch, California–based Money360, on average, more than 50 percent of brokers believe that multifamily commercial real estate will be the hottest asset class in 2018. The survey — based on a poll of 148 respondents at the recent MBA Conference in San Diego — evaluated mortgage broker and lenders’ views of the real estate industry in the year ahead and predictions for their work with non-bank lenders.
The survey also found that 42 percent of brokers approach more than six lenders when looking for financing, and 78 percent believe that the amount of financing they do through non-bank lenders will increase over the year. Moreover, non-bank lenders are growing in popularity. A total of 41 percent of respondents said that 25 percent to 50 percent of their deals are financed through non-traditional outlets (such as direct lenders and marketplace lenders). Of the respondents that said they will seek more financing from non-bank lenders in 2018, nearly 50 percent said it was due to more financing ability, with 18 percent identifying the reason as a more transparent process.
Over the next year, 38 percent of respondents believed that strong economic growth will be the largest driver of commercial real estate growth, with 27 percent identifying the interest rate environment as having an impact.
SoCal Real Estate caught up with Gary Bechtel, president of Money360, to discuss the findings and where multifamily financing will be strongest in Southern California.
SoCal Real Estate: What are the reasons for intermediaries to approach more than six lenders in multifamily financing deals?
Bechtel: An intermediary’s ultimate goal is to find the best deal for their clients, so they do comprehensive due diligence on behalf of their clients, which often involves approaching a number of lenders — the data showed that a staggering 66 percent of respondents approach more than four and 42 percent approach more than six lenders. This statistic underscores borrowers’ growing needs for the tailored, efficient, and competitive deals non-traditional lenders are well positioned to offer.
With non-bank lenders gaining ground, how will traditional lenders keep up?
Every borrower has different needs when they are seeking financing, so there is room for a variety of lending options. Non-bank lenders are making an impact on the industry because of the benefits that we offer, such as transparency, speed, flexibility, and — importantly — competitive pricing.
Where in Southern California (outside of L.A.) are multifamily financing transactions most prevalent?
Outside of L.A., we’ve seen tremendous growth in the Inland Empire. As more corporate giants are realizing the value of building their headquarters or distribution facilities on the outskirts of major cities, this area of Southern California has experienced rising commercial real estate interest and a thriving economy.
How are lenders viewing the SoCal multifamily market as the frenzy for deals increases?
The industrial and multifamily sectors are hotter than ever in the Southern California market, and lenders have taken notice. We are seeing borrowers hungry for more transactions in this area—particularly as the housing shortage continues to deepen across Southern California, driving up demand for multifamily loans — and lenders are answering that call with competitive rates. Non-bank lenders offer flexibility and ability to close quickly on deals, which is essential when the market heats up like this.