The commercial real estate realm is set for a boom, as commercial mortgages experience a resurgence in both Canada and the United States led, in large part, by one specific type of lender.
“In Canada, over $30 billion of loans were originated in 2013 and the CMBS (commercial mortgage-backed security) volumes more than doubled from 2012 levels to reach almost $1.6 billion in 2013,” according to a recent report by Jones Lang LaSalle, a financial services firm that focuses on commercial real estate services and investment management. “This reflects the ongoing improvement in financial markets globally, with more confidence leading to increased liquidity and improved access to commercial property debt.”
According to the report, the big five Canadian banks had an average increase of 13 per cent in production levels in 2013 compared to 2012.
However, the largest growth was seen in CMBS lenders, whose production levels reached $1.5 billion in 2013, compared to a mere $500 million in 2012. Moreover, levels are expected to exceed $2 billion in 2014.
But are brokers taking notice?
“New CMBS lenders have entered this space and we expect to see five conduits up and running in 2014, putting further pressure on traditional lenders to compress their spreads,” the report states. "It is to be noted that just before the peak of the credit crisis, there were 11 CMBS lenders operating in Canada, doing around $5 billion of CMBS lending per year.”
The entrance of new lender players is expected to favour clients, who now have access to more commercial funds than ever before.
“The overall new production levels have steadily climbed over $33 billion in 2013, including approximately $1.6 billion in CMBS issuance,” the report states. “The entry of additional CMBS lenders will certainly swing the pendulum further in the borrower’s favour.”