Commercial Real Estate Recovery: Who’s Leading the Charge?

Believe it or not, we are quickly approaching the mid-year mark and the market continues to recover—but in baby steps rather than in long strides. Demand for commercial properties is up as developments get more confident about the market and lenders approve more originations. The latest data on property deals through the end of April reflect a robust 28 percent year-on-year growth rate. Yet you need only look at the monthly year-on-year growth to see how spotty and unpredictable the pace of recovery has been this year (see accompanying graphs). Continued market uncertainty underscores the importance of property assessment firms focusing their strategic efforts on the strongest areas of activity. This Strategic Brief identifies some of the most active buyers, portfolio investors, brokers and lenders today for environmental firms looking to get a piece of the action.


Heavy Hitters in Commercial Deal Making

In 1Q13, significant commercial property sales were up 35 percent from a year earlier—the second highest quarterly volume post-recession—and momentum continued through April. Portfolio transactions played a significant role in driving demand for property assessment services in the first few months of the year, particularly in the multifamily sector. Also promising is that commercial real estate deal flow is no longer just concentrated in the largest metros of the U.S. Secondary and tertiary markets are making serious headway.CRE-Whos-Lending---Chart1CRE-Whos-Lending---Chart2Lending Leaders

One of the most positive market trends of the year so far is the emergence of a greater diversity of players lending on commercial properties. Competition among lenders for the most creditworthy borrowers is intensifying. Large national/international lenders, in particular, have aggressive goals for lending on commercial properties this year and beyond—and many are commissioning the due diligence that CMBS issues require upfront in the event that loans are bundled into issuances down the road. For the first time in years, regional and community banks are actively ramping up originations as well and competing with larger players. As shown in the accompanying tables, JPMorgan Chase is the largest bank in the country in terms of total assets, followed by Bank of America, Citigroup and Wells Fargo.CRE-Whos-Lending---Chart3The U.S. Small Business Administration continues to be a healthy driver for environmental due diligence services under its popular 7(a) program. Many community banks rely on SBA guarantees to extend loans on commercial properties. In terms of number of loans, Wells Fargo is still the lead player in this sector of the lending market, followed by JPMorgan Chase and Huntington National Bank.