Lenders Appetite for Commercial Property Debt Dwindles

Commercial property activity has declined substantially this year, but it isn’t for lack of demand. Cash equity seeking commercial property deals is at an all-time high, according to data from Reonomy. At the close of 2019, there was $147 billion in cash equity available for commercial property acquisitions, and in the first half of 2020, nearly $24 billion had been raised. However, lender appetite for commercial property debt has dwindled, and the lack of debt financing had impacted commercial property investment.

This year, dollar volume for commercial property has decreased by 46% year-over-year through July 2020, and deal volume has decreased 37%, despite the availability of cash equity, Reonomy reports. Hospitality had the biggest decrease in deal volume, but all assets classes saw a significant decrease. In addition lenders’ lack of appetite for commercial assets has impacted price discovery, further deterring transaction volumes. This may trend may continue to negatively impact transaction activity for several quarters.