The MBA’s Commercial/Multifamily Finance Convention & Expo (CREF23) wrapped up in San Diego last week. This four-day event was a great opportunity for attendees to stay on top of market trends and get insights from industry veterans regarding where the real estate market is heading. GoDocs was proud to attend and showcase our offerings at this important industry event — highlighting future trends within the CRE landscape.
General Session: CREF Market Outlook
The CREF Market Outlook session, led by three economists and examining data collected by the MBA, shed light on the state of the CRE market for the upcoming year. Of the lenders polled by the MBA, none expect the market to settle in Q1. Instead, most anticipate gradual improvement throughout the year, with a slightly stronger second half. By 2024, nearly all respondents expect the market to be neutral or settled.
Loan volume is predicted to remain low in the first half of 2023 but is expected to rise slowly after Q2. Multifamily loan volume is projected to be 16% lower in 2023 compared to 2022, which had a strong first half.
It was apparent that there is a sense of caution among lenders, who had largely hit pause on lending following rising interest rates. However, the data suggested that such hesitation is temporary and will normalize, albeit slowly.
Whether a project is for ground-up construction, major rehabilitation, or the modest or minor rehabilitation to re-purpose an underperforming project, ConstructionDocs™ provides the flexibility to manage the financing of any development project.
Breakout Session: Construction Lending: What is Today’s Steady Stack?
Session attendees got a deep dive into construction lending from top CRE construction experts, including Patrick Crandall (Pacific Western Bank), Lonnie Hendry (Trepp, Inc.), Tommy Nance (PGIM Real Estate), Chris Robbins (GreenRock Capital, LLC), and Kimberly Taynton (BWE).
Throughout the discussion, the panelists agreed that commercial construction origination is expected to remain lower into at least the next quarter 2023. Should an uptick in origination occur, it will likely be small, with any such growth through the remainder of 2023 likely being anemic. Notably, there has been an increase in the origination of “resilience” projects, e.g., ESG/sustainable projects. However, the panel concurred that resilience projects are niche and not necessarily indicative of a new trend in origination due to the current heightened interest rate environment.
Office Space Buzz
With the recent shift towards remote work, banks are understandably hesitant to lend on office space. The changing work landscape has introduced new uncertainties, making it difficult for banks to assess the long-term viability of commercial office buildings. Many attendees at MBA CREF23 were curious about converting office space to multifamily. While the buzz around this topic was certainly palpable, panelists noted that only 10-15% of office buildings are eligible for conversion, and the cost of such conversion is relatively high. Given the many questions and concerns raised about the practicality of such projects, office space is unlikely to be a major product type for lenders in 2023.
While many lenders are moving away from office space, multifamily and industrial spaces were declared “darlings” of the industry. Even certain retail properties, such as grocery stores, have been surprisingly resilient.
Overall, MBA CREF23 provided an invaluable platform for networking and knowledge sharing among professionals in all aspects of commercial real estate finance. Despite the industry’s uncertainties and challenges, many industry leaders expressed hope that the market would slowly stabilize by 2024. This sentiment was reflected throughout the conference and highlighted the resilience of the CRE market, even in the face of significant challenges. As always, MBA CREF23 proved to be an important platform for networking, education, and discussion, and we look forward to seeing what new developments and insights will be shared in 2024.
Even though there may be slowdowns and downturns in certain markets or sectors, as long as companies maintain a long-term view and focus on developing strategies to succeed over time, they can make it through difficult times while continuing to grow their business. As we move through the current market, technology continues to be a powerful tool for innovation in CRE and a means for increasing efficiency in operations.
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GoDocs, the automation leader in commercial loan document generation, offers next-generation software solutions for banks, credit unions, and private lenders to create a streamlined process for closing commercial loans. We provide lenders and borrowers with access to the first and only purely cloud-based system that offers a flexible and frictionless solution. Today, the company is trusted by industry-leading commercial lenders and is proud to back its solutions with onshore support for a seamless experience.