Article
Real Estate Goals Still Intact – What Borrowers Can Expect in 2021
November 30, 2020 2 Minute Read
Canadians think of lenders when buying a house, but large institutions and private capital also need access to debt capital if they are going to purchase that office building on the skyline or plot of land for development. As we head into 2021 still battling COVID-19, a big question facing the Canadian commercial real estate industry is whether loans will be available. CBRE’s annual Canadian Lenders’ Report was just released and has all the answers.
The survey includes responses from domestic and foreign lenders on 33 hot button issues.
Here are three key takeaways:
1. More money available for real estate buyers:
Despite the current economic environment, the report reveals that few lenders are looking to decrease their real estate lending in 2021. In fact, 57.1% of lenders are looking to maintain their existing real estate lending allocations, with 40.0% aiming to further increase allocations in 2021.
2. Not all properties treated the same:
Lenders are most uncertain about hotels, with 77% expressing concern, up 51% from a year ago. Regional malls in smaller cities are almost equally worrying for lenders; 74% had concerns, up 15.6% from 2019. Entertainment and food service retail is also giving lenders pause, with 69% expressing concern, up 29.4% from last year.
The three property types that cause the least amount of lender concern were purpose-built apartments, industrial and grocery-anchored retail—all of which have proven essential during the pandemic. Just 3% of lenders had concern with these three property types.
3. Location, location, location:
Properties in Canada’s biggest cities will get the best reception from lenders. 74.3% of lenders said they had a strong willingness to lend to transactions in the Greater Toronto Area. Canada’s biggest city was followed by Vancouver (60.0% of lenders expressed strong willingness to lend there), Montreal (51.4%), Ottawa-Gatineau (45.7%) and Waterloo Region (22.9%).
Lenders are more worried about Alberta. Most real estate financing in Calgary and Edmonton would depend on the type of deal or specific relationship with the lender. “2020 has been a highly disruptive year and the real estate lending market was no exception,” said Carmin Di Fiore, Executive Vice President of CBRE's Debt and Structured Finance team. “Some property outlooks went unaffected while others are in flux and it may take some time before a new normal is established. However, lenders have belief in the overall prospects for real estate in Canada and remain committed to providing a liquid and sensibly capitalized financing environment going forward.”
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