Commercial real estate construction companies demand financing amid economic improvement

For commercial construction companies, obtaining financing is getting easier as more banks return to the CRE loan business.

The Northeast has dominated the commercial real estate space as commercial lenders return to the business of originating CRE loans.

The Boston Business Journal reported that, when compared to the rest of the U.S., the Northeast region outperformed all other regions by almost twice as much in regards to total volume of commercial real estate loans. Also, with the lowest cap rate of 6.52 percent , the Northeast experienced $21 billion in CRE loans in 2012. That figure exceeds the next two highest markets combined, the Pacific and the Southeast, with $9.8 billion and $9.6 billion, respectively. The Mountain region, on the other hand, only managed $3.4 billion in CRE volume – a pace that was almost halved by Massachusetts alone. Covering all sectors including industrial, multifamily, retail and lodging, the Bay State raked in $1.2 billion in 2012.

According to data from the CoStar Group, banks across the board are loosening their underwriting standards and settling for tighter margins as demand for CRE loans has increased competition among lenders. 

"We've recently seen lenders aggressively come back to this business who retreated during the crisis," said Philip Flynn, CEO of Associated Banc-Corp. "With this competition, we've seen yields on new commercial, commercial real estate and specialized loans decline by about 10 to 15 basis points on recent transactions."

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