Welcome to the CRE News Digest from First American Title NCS, where we explore the biggest stories in commercial real estate. As a legacy brand that has worked in CRE for over 120 years, First American knows the market and the forces impacting our clients’ businesses.
Big Picture: Lending Gains and Losses
Like the CRE landscape at large, the current state of commercial lending has its bright spots and areas of concern. The Federal Reserve’s decision to raise interest rates to historic highs has slowed dealmaking. Traditional bank lenders have begun to build up reserves to hedge against troubled loans; according to the IMF, the percentage of non-performing CRE loans in U.S. banks’ portfolios increased to 0.81% at the end of 2023 from 0.4% a year earlier.
Uncertainty in the banking sector has created opportunities for alternative lending. The spring 2023 banking crisis initially put a spotlight on private lenders, and their role has continued to expand as banks scale back. Major asset managers, including Apollo and PGIM, shared with Commercial Observer that their loan volume was strong throughout 2023, with Apollo notably “[managing] to increase its lending volume from 2022.”
Momentum in the CMBS market, in particular, is fueling hopes for an upswing heading into 2025. As interest rates have stabilized, conditions for CMBS dealmaking have improved. According to Bloomberg, investors are “greenlighting big investments in a sign that they believe property markets have begun to rebound.” However, the extent of the rebound is yet to be determined.
State of the Sector: Multifamily
Multifamily real estate is in flux after a recent construction boom flooded the market with new units. In a recent analysis, First American Senior CRE Economist Xander Snyder shared that “the number of apartments under construction… is still near an all-time peak, with just under one million units currently being built.” While the surge in supply will likely last into 2025, data suggests that renters may still face long-term housing shortages. National multifamily construction starts fell in March to 290,000, representing a 44% drop year-on-year. Construction and permit data from primary markets, including Chicago and California, paint a similar picture. However, secondary markets in the Sun Belt (namely Nashville, Knoxville, and Greensboro/Winston-Salem) saw increases in permitting, continuing the pattern of strong growth in these regions in recent years.
Women Making Strides in CRE
The CRE industry is elevating women in commercial real estate through recent initiatives, conferences, and awards programs. Bisnow held a Women Leading Real Estate event in Chicago that honored 22 rising female stars in the Chicago CRE space. In late March, WX — an association for women in New York real estate — launched an effort to encourage women real estate executives in the latter stages of their careers to join for-profit boards. The initiative’s goal is to address the underrepresentation of women in leadership positions. Additionally, two standout women from First American were named as 2024 GlobeSt. Women of Influence. Deputy Chief Economist Odeta Kushi was recognized in the Independent Consultant/Advisor category, and Vice President and Division Area Manager Crystal Cook was highlighted as a Diversity Champion for her work to implement and support diversity, equity, and inclusion initiatives across the firm. Odeta and Crystal will represent First American at the Women of Influence conference this July.
