Despite Forecast Increases, Rates at Historic Lows

Slatt says new projects can still secure debt at reasonable rates no longer available from traditional banks.

SAN FRANCISCO—Commercial mortgage lending continues to be healthy in 2017, with rates remaining at historic lows compared to the projected increases anticipated earlier this year, according to Robert Slatt, principal with commercial mortgage banking firm, Newmark. As traditional banks adjust to the new federal high-volatility commercial real estate/HVCRE banking regulations, construction financing from life insurers, pension funds and other non-banking institutional sources is on the rise. These loans spread the risk of new construction for extended terms, ensuring new projects can still secure debt at the reasonable rates no longer available from traditional banks, he says.

Newmark’s correspondent lenders have placed nearly $500 million of construction to permanent loans during the past 12 months for development projects in the retail, multifamily, self storage and mixed-use asset classes. Newmark closed $726 million of commercial mortgages across 80 unique transactions in third quarter 2017. This brings the company’s overall production to more than $1.975 billion for the first nine months of 2017.