A new survey suggests that commercial lenders expect a busier year in 2024, thanks largely to a more stable interest-rate environment.
The survey conducted by Nashville-based Built Technologies, a provider of construction and real estate finance technology, shows that lenders in the United States are largely optimistic about the financial viability of real estate investment in 2024.
The company’s first State of Lending Survey gathered responses from 117 national, regional and global lending institutions.
According to Dan Gendler, director of analytics at Built, lenders expressed confidence that Federal Reserve Board rate cuts will boost lending activity in the commercial real estate market. They expressed concerns, though, over government regulations and project completion timelines.
Lenders responding to the survey also said that they expect alternative lending sources to fill the gaps left by traditional institutions unable to bear certain risks, either due to regulatory constraints or balance sheet considerations.
More optimistic times
Key findings from the survey underscore the prevailing optimism among U.S. lenders regarding the economic climate.
While a significant 66% of respondents believe that the United States is not currently experiencing or nearing a recession, 75% did express apprehension about the macroeconomic outlook moving forward.
A total of 59% of respondents said that they anticipated that government regulations will exert a notable influence on their financing decisions in the coming year. An overwhelming majority (80%) of participating lenders also express concerns about the extended duration of construction projects over the next 18 months.
As traditional lending institutions grapple with regulatory constraints and balance sheet limitations, alternative sources of lending are increasingly filling the void. A total of 41% of respondents foresee becoming referral sources for construction loans to non-bank lenders, including major players like Apollo and Blackstone, as liquidity tightens and balance sheets constrict. Only a minority (11%) report experiencing no liquidity or balance sheet tightening within their lending institutions.
Looking ahead to the year’s end, 74% of respondents anticipate a decrease in the 30-year mortgage rate by Jan. 1, 2025. Among these, approximately one-third project rate reductions ranging from 0.51 to 1 percentage points, while 24% expect declines between 1.01 and 1.5 percentage points.
Respondents also ranked various technologies based on their perceived impact on strategic investments. Topping the list were products aimed at enhancing collaboration among project stakeholders, followed by software solutions to improve workflow efficiency and revenue outcomes.
Marketplace solutions facilitating more efficient procurement of goods and services, as well as data products for informed decision-making, also garnered notable attention.