Anil Bharwani

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Lenders open vaults to commercial real estate

Wed Jul 30, 2014 12:42pm PST

 

Commercial real estate developers and investors rushing to secure low-cost financing amidst fears of higher interest rates are finding a warm welcome this summer from a lot more lenders.

 

 

New commercial mortgages in Canada reached $33 billion in 2013, well above the pre-crisis levels of 2008, reports Jones Lang LaSalle (JLL) Debt Capital Markets, and the trend is apparently ascending.

“We track more than 100 sources of debt capital available to Canadians, and there are strong indications that lending is on an upswing”, said Amar Nijjar, vice president and practice lead for JLL Canada’s Debt Capital Markets team. “Nearly all of the lenders are expressing an interest to lend at the same or higher levels from than last year. There is also an emergence of non-traditional sources that provide creative financing solutions, filling a void that previously existed in the marketplace.”

Canadian Mortgage Backed Securities are on also the rise – lenders originated approximately $1.5 billion in 2013 compared to $500 million in 2012. “The market anticipates that these lenders will surpass $2 billion in 2014,” Nijjar said.

Canadian interest rates are anticipated to increase in the near future as inflation continues to edge up and unemployment levels decrease, according to JLL. Lower unemployment translates to increased consumer spending and the ability for landlords to raise rents, Nijjar notes.

JLL warn that the multi-family sector, which benefits from low-cost Canada Mortgage and Housing Corp.-insured mortgages, is facing federal government scrutiny. “We expect further regulatory changes restricting available capital in this sector,” JLL states in its report on commercial financing.

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