ShareCommercial space is heavily concentrated in large buildings, but large buildings are a relatively small number of the overall stock of commercial buildings. In terms of inventory, commercial real estate (CRE) markets are bifurcated, with the majority of buildings (81 percent) being relatively small (SCRE), while the bulk of commercial space (71 percent) is concentrated in larger buildings (LCRE). The bifurcation continues along transaction volumes as well, with deals at the higher end—$2.5 million and above—comprising a large share of investment sales, while transactions at the lower end make up a smaller piece of the pie.
Data are readily available for transactions in excess of $2.5 million from several sources, including Real Capital Analytics (RCA). However, in general, data for smaller transactions—many of which are handled by REALTORS®—are less widely available. NAR’s CRE research offers a window of information for SCRE properties and transactions, mostly valued below $2.5 million.
The latest report from RCA focuses on lending sources in the CRE space. The 2015 landscape is more diversified and balanced than the prior year. CMBS issuers account for 21 percent of the lending market this year, a decline from last year’s 27 percent. Government agencies (Fannie Mae and Freddie Mac) were the second source of funds, by market share, with 18 percent of activity.
Banks have also stepped-up lending for CRE projects, accounting—in aggregate—for 38 percent of market share. While national banks comprised 16 percent of total activity, regional and local banks made up 15 percent of total activity, a significant increase from 2011 when they accounted for only 9 percent of total.
Based on NAR’s 2015 data, the capital picture displays a fundamentally different landscape. Local and regional banks account for 58 percent of REALTORS® CRE market lending. Local and community banks represent over one-in-three lending sources, having gained market share from the prior year, when they made up 30 percent of the market.
Private investors were the third main capital providers, accounting for 11 percent of deals during 2014. National banks came in fourth place, with 7 percent market share. The Small Business Administration and credit unions made up 6 percent and 5 percent, respectively, of transactions. Life insurance companies were much less active in REALTOR® markets, representing 3 percent of deals, while CMBS conduits accounted for only 1 percent of funding, tied with REITs and public companies.
For more information and the full report, access NAR’s Commercial Lending Trends 2015 at http://www.realtor.org/reports/commercial-lending-trends-survey.