“The larger banks are very disciplined in their commercial real estate lending, but when you get beyond that segment, there’s a significant competitive force that’s being applied to banks from the non-banks.”
Last week I attended a terrific breakfast event in Manhattan hosted by the MBA of NY. It included a Q&A with keynote Brian Bailey, Federal Reserve Bank of Atlanta, who will be speaking at our PRISM event in Nashville in May. Here’s what he had to say in NYC about the economy, commercial real estate lenders and the greatest risks facing the market:
On the current commercial real estate landscape?
“I’m hoping for a victory lap. Expect to see a fading of the tax effects later this year, but the economy continues to create new jobs. We’ll continue to see growth this year and into next. I’m bullish about getting more people into the work force.”
On who will fill space in CRE lending if regulations force banks to pull back?
“Banks are running neck and neck with GSEs on market share. Nonbanks had 11% of the lending universe, but they’re growing very fast. They’re nimble because they’re not as encumbered by the regulations. There is a lot of available capital and when there’s excess capital avail, it’s one of the ingredients for issues in commercial real estate.”
On technology as friend or foe in commercial real estate?
“CRE was a late adopter, but we’re starting to see it speeding up. Technology is impacting retail and shifting that sector more toward services than sale of goods. We also see technology having implications in office sector, enabling WeWork, telecommuting and driving more efficient use of space. Disruptions are creating opportunities as buildings constructed in the 1970s, 80s and 90s for a different market need than today’s.”
On the biggest concerns facing the market?
“A lot is being made of potential black swan events. Then I run down the tangent of when we have too many originators with too much capital, are we starting to see aggressive lending take hold? Are we keeping the underwriting where it needs to be at this stage of the cycle?”
On underwriting discipline in the market?
“You have to segment. The larger banks are very disciplined in their commercial real estate lending, but when you get beyond that segment, there’s a significant competitive force that’s being applied to banks from the nonbanks. We don’t have the same transparency there so that’s certainly a concern in the market right now.”
On Wednesday, May 8, 2019, Brian will be speaking at EDR’s PRISM conference in Nashville. EDR’s PRISM conference is a one-of-a-kind event connecting leaders from commercial real estate lending and property due diligence to network, learn and collaborate. Over the course of two days, well-respected speakers in technology, commercial real estate lending and risk management will share their intelligence on the future of the industry. The conference also includes the annual PRISM Industry Awards Ceremony that celebrates individuals, firms and institutions that have demonstrated excellence in specific areas.
For more information and to register: https://edrnet.com/prism-conference/