CREFC Survey Looks at Borrower Sentiment

WASHINGTON, DC-In the first of what will be an annual survey, The CRE Finance Council reached out to people that traditionally, as an organization representing finance providers, it has not queried--that is, the borrower. In recent years the industry association has been stretching to better service the commercial real estate finance community, with this survey of their customers the latest innovation. Last month the association debuted another new survey, a broad based market outlook survey from its own members. CREFC President and CEO Stephen M. Renna noted to GlobeSt.com at the time it was a unique survey covering feedback from all aspects of the commercial real estate lending community.

The findings in this latest survey revealed interesting insights into the mindset of the CRE borrower. They have, not surprisingly, made note of the growing competitiveness of lenders in this space. Commercial banks and life insurance companies received top scores in overall satisfaction, followed by GSEs, private capital, and CMBS.

The survey also found demand was growing for finance: 46% of respondents said they planned to increase their volume for new loans in 2014 compared to 21% of respondents indicating a decrease. At the same time, only 30% of respondents said they would increase refinancing volume while 35% will decrease it.

As they step up their borrowing activity, commercial banks will be the top target. Some 43% of respondents indicated they reach out to them this year--a margin of 2:1 over other lenders. Two-thirds of respondents had a positive experience with commercial banks.

Conversely, two-thirds of respondents had a negative experience with CMBS. Indeed dissatisfaction with the conduit market appeared to be a running theme in the survey. Besides trailing in overall satisfaction, CMBS lagged all other lender types in post-closing experience satisfaction as well.

There is little mystery why borrowers use CMBS as a finance source: as they survey noted, CMBS is the most competitive lending source on proceeds, while commercial banks and life companies are the most competitive lending sources overall except with respect to loan proceeds.

However borrowers do not necessarily rank proceeds as the top driver in financing. According to the survey, the most important factors in borrowing decisions are loan terms, certainty of execution, and rates and fees, followed closely by loan proceeds.

The survey also provided a data point of interest to brokers: only 18% "always" use brokers while 58% "sometimes" do. As financing becomes more competitive, brokers will surely be pushing to raise the former.