CBRE’s new real estate lenders’ report revealed an improvement in the sentiment around commercial real estate lending, with borrowers potentially experiencing greater debt availability and increased competition among lenders this year.
The report shared that lenders have expressed no concerns so far regarding possible tariffs, have been preparing to support heightened transaction activity, and have been readying themselves for a much more active year in general.
“Tariffs aren’t registering as a primary concern or altering lending in a material way, but that doesn’t mean things can’t change if the situation evolves,” said Joshua Sonshine, CBRE’s senior vice president, in a press release relating to the report.
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“Lenders are feeling increasingly good about every asset class and property type, with levels of concern dropping across the board, except for land and condos,” said Jessica Harland, CBRE’s senior vice president, in the press release.
“Nearly half of lenders intend to increase allocations to commercial real estate for a second year in a row and [the percentage of] those looking to make a large increase is also up,” Harland added in the press release.
According to the survey, the top markets of choice were Toronto, Vancouver, Montreal, and Ottawa, with Calgary and Edmonton rising the most in this year’s market rankings. On the other hand, the survey showed that the top targeted asset class was purpose-built rental apartments, particularly for products insured by the Canada Mortgage and Housing Corp.
Survey statistics
The report revealed that, among the lenders surveyed:
- 73 percent were active participants interested to some extent in every Canadian market
- almost 50 percent planned to grow their retail budgets this year, compared with the 14-percent average in the seven previous surveys
- 73 percent planned to increase their budgets this year for debt availability for purpose-built rentals
- seven percent of lenders intended to increase office budgets, up from zero percent last year
- 76 percent expected higher loan origination volumes compared with the previous year
- 24 percent were preparing to deploy at least 20 percent in estate lending capital this year
- 70 planned to actively or very actively compete on deals this year
- 52 percent would be requiring more up-front equity for condo developments this year compared with last year
- 57 percent saw uncertainty surrounding underwriting property valuations as the primary challenge
- 17 percent said that carbon footprints were impacting loan availability and terms
The report, however, identified potential challenges arising in connection with lending in select asset classes and lending to certain property types and cities.
The report analyzed 37 domestic and foreign lenders’ responses in a survey on activity expectations, lending terms and criteria, and lender sentiment and preferences. It covered more than $200 billion in commercial real estate loans under management combined.
“With increased capital flows, compressing credit spreads and momentum continuing to build in both the equity and credit markets, 2025 will be an interesting year and lenders intend to help make commercial real estate trades happen,” Sonshine said in CBRE’s press release.