After throwing piles of money into the commercial real estate market, banks are now expressing concern that they may not have the money to fund $400 billion worth of loans that need to be refinanced next year. BloombergMarkets recently reported that those fears are being exacerbated by the fact that sales of commercial mortgage-backed securities (CMBS) have declined to its lowest levels in more than 10 years.
What is also keeping banks up at night is the latest round of new regulations from the federal government — namely, the Federal Reserve, Office of the Comptroller of the Currency, and Federal Deposit Insurance Corp., all of whom were quoted by Bloomberg as saying they will be paying “special attention” to the lack of safeguards in place for loan portfolios. The agencies told the banks to either come up with a way to protect the portfolios or come up with more money to reduce the risk.
According to Morgan Stanley, the commercial real estate market represented 52% of loan originations so far this year — its highest level ever and up from 35% back in 2014. But now federal regulators will be closely examining commercial real estate lending by the smaller banks, which reduced their fees and liberalized their underwriting standards in order to keep up with their larger counterparts.
This, in turn, has hit the commercial real estate market. A recent report by Pimco showed that broker transactions in the first three months in 2016 fell by 11% compared to Q1 2015. Citing regulations, maturing loans and volatility within the commercial real estate market and the global economy, Pimco foresees commercial real estate prices sliding by as much as 5% over the next 12 months.
If you are looking to invest in or purchase a commercial real estate property, or would like to sell your interests for profit, it is important to contact an experienced real estate attorney who can guide you through the process, and protect your legal rights. For more information about real estate and taxation issues, contact the experienced attorneys at AGMB at 310-300-2900 for the Los Angeles office, or 212-201-1170 for the New York office.