Commercial real estate lenders may become more cautious

Lenders for commercial real estate developments in Illinois and around the country may become more cautious in 2016, according to many industry observers. The expected caution is coming after a six-year boom in the commercial real estate market, leading lenders to believe the market has aged enough to have concerns about projects that might be deemed riskier.

According to data released by the Federal Reserve, underwriting criteria for commercial real estate mortgages has already been tightened by banks. In some major metropolitan markets, there is a surplus of luxury condos and other new commercial real estate developments because of the boom. Such higher-end commercial real estate developments are among those considered to be the most vulnerable to the tightening credit standards for loans.

Credit availability is falling, as has the issuance of commercial mortgage-backed securities. Developers are turning to alternative sources for financing their projects as a result. An increasing number of lenders that are regulated are exiting the market, leading experts to believe more private lenders will step in to fill the gap. A high degree of volatility is expected to occur.

People who are involved in commercial real estate development may want to consult with an attorney about obtaining the financing they need for their projects. While the current market may be tighter, it is possible for developers to be able to find and obtain financing through alternative sources if the traditional ones are not available. An attorney may be able to help clients identify and secure financing so that they can move forward with their development projects.

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