New CREFC survey tracks buoyant lender optimism as recovery gains strength

Lenders are hopeful but cautious as the covid-19 pandemic drags on.

A new survey from the Commercial Real Estate Finance Council has found that US lenders are largely optimistic about the coming year, citing a continued recovery from the covid-19 pandemic and rising transaction activity across the US.

The quarterly Board of Governors survey, published yesterday, interviewed roughly 60 senior commercial real estate finance professionals from a broad swath of the market, including balance sheet and securitized lenders, loan and bond investors, mortgage bankers, private equity firms, loan servicers, rating agencies, attorneys and accountants.

“While overall sentiment slightly neutralized in the third quarter, there is great reason for confidence in the outlook as we close out the year,” said Lisa Pendergast, CREFC’s executive director.

Respondents cited the rise in transaction activity as a particular area of optimism, with 82 percent of respondents indicating that they feel positive about the next 12 months. “With transaction activity increasing and greater demand for both CRE debt and equity, there is much to look forward to,” Pendergast said.

This sentiment around transaction activity is confirmed by an October report from Real Capital Analytics that tracked a significant increase in transaction activity in the third quarter. Through the first three quarters of the year, there were more than $450 billion of sales. Year-over-year, this represents a 151 percent increase in transaction activity.

Bigger picture, however, more respondents are concerned about the US economy. There was a notable drop off from the second quarter, when 88 percent of the respondents reported a positive outlook. By comparison, just 67 percent of respondents saw the economy improving at the end of the third quarter.

Covid-19 impact

CREFC this quarter also added a component of the survey that addressed issues around the covid-19 pandemic. Despite some setbacks around the Delta variant, lenders were optimistic that the end of the pandemic is in sight and about 88 percent of lenders surveyed reported being fully operational again.

There were a few caveats, however. The survey found 28 percent of respondents are concerned office will fare the worst post-pandemic, a 23 percent jump from the second quarter. Most are still convinced people traveling less for work will be a drag on the hotel sector, with 82 percent predicting a slow recovery in corporate travel.

“With transaction activity increasing and greater demand for both CRE debt and equity, there is much to look forward to,” she said.