Embed Size (px)
Citation preview
CRE MARKET UPDATEDDD Long Island
By: Dianne Crocker, Principal AnalystEDR InsightOctober 13, 2016
US Economy and CRE
2016 looks much like it did in 2015—with
somewhat less impressive numbers
CRE TRANSACTIONS: Small Is Big
▸Rate of growth is tapering off▸Fewer portfolios hurt large cap deals▸Small deals holding pace▸Secondary metros in vogue…
Top Secondary Markets for Due Diligence (EDR ScoreKeeper Metrics)
Construction Starts Hitting Cyclical Peak
“▸“It’s at this stage of the cycle that we also see strong loan growth combined with easing underwriting to result in increased credit risk. CRE portfolios have seen rapid growth, particularly among small banks, and concentration risk management has become an area of emphasis for regulators.”~Thomas Curry, U.S. Comptroller of the Currency
LENDING CLIMATE: Caution Rules
28%
19%
13%12%
7%
10%9%
18%
20%21%
7%
13%
0%
5%
10%
15%
20%
25%
30%
CMBS Govt Agency National banks Regional/local banks Global Insurance
CRE Property Lending: Shifting Sands
2014 2016
Top Lenders…
1. Wells Fargo
2. JP Morgan
3. Citigroup
4. CBRE
5. Deutsche Bank
6. Morgan Stanley
7. Bank of America
8. Met Life
9. Walker Dunlop
10. Goldman Sachs
…1H16
11. Berkadia
12. Key Corp.
13. PGM Real Estate
14. Capital One
15. Berkeley Point
16. PNC
17. US Bancorp
18. NY Community Bank
19. Signature Bank
20. Bank of China
2.The Phase I ESA Market
…in the context of CRE market
trends
Progressing Along Long Top of Recovery
?
NEW YORK’s Phase I ESA Trend Line…
…Mirrors the U.S. Phase I ESA Trend Line
NY County Leaders in Phase I ESA Activity
“Opportunities exist at the intersection between technology and New York City’s more traditional industries of finance, media, advertising and retail. Tech continues to disrupt and transform these industries creating a more dynamic local economy. In terms of location, Brooklyn and Long Island City are lower-priced office alternatives to Manhattan. The outer boroughs are prime areas for tech startups establishing an office footprint, boasting emerging creative communities and direct access to a young talent base.”
JLL Technology Outlook, October 2016
In Long Island’s Favor:
MORE TECHNOLOGY
MORE PRESSURE
THE ERA OF “NOW”
Efficiency Is the Name of the Game
3.
“Pressures on efficiency in the lending sector are all moving in the same direction. How can you conduct underwriting faster and cheaper, and yet better than in the past? “Technology and using data in new ways will be part of the solution.”
~Michael Berman, former CEO of CW Capital and past Chairman of the Mortgage Bankers Association
SURVEYHow sensitive are your clients to price in selecting a Phase I ESA provider?
1=NOT VERY, OTHER
FACTORS MATTER MORE
5=PRICE IS THE MOST
IMPORTANT FACTOR ?
SURVEYHow sensitive are your clients to price in selecting a Phase I ESA provider?
1=NOT VERY, OTHER
FACTORS MATTER MORE
5=PRICE IS THE MOST
IMPORTANT FACTOR
4.25
SURVEYHow sensitive are your clients to TAT in selecting a Phase I ESA provider?
1=NOT VERY, OTHER
FACTORS MATTER MORE
5=SPEED IS THE MOST
IMPORTANT FACTOR ?
SURVEYHow sensitive are your clients to TAT in selecting a Phase I ESA provider?
1=NOT VERY, OTHER
FACTORS MATTER MORE
5=SPEED IS THE MOST
IMPORTANT FACTOR
4.1
FORECAST: Where Are We Headed?
NEAR-TERM FORECAST:Transactions to decline over next 2 years…
NEAR-TERM FORECAST
▸Interest rates will creep up▸High transaction activity in warehouses, data centers▸Spate of retail closures drive asset movement ▸Modest CRE lending growth (3%), strong competition▸Investors are recalibrating their expectations
“Investors are growing cautious about the longevity of the current expansion cycle and, as a result, are taking steps to de-risk their portfolios.”
LONG ISLAND:MARKET CONFIDENCE INDEX
The Long Island environmental due diligence market is:
Rising
quickly
Rising
slowly
Plateauing
On the
decline
On a scale of 1-5, what is your outlook for the Long Island due diligence market just one year
from now?
1 = Very pessimistic 5 = Very confident
3.4
NREI’s October survey:
• 53 percent expect
underwriting standards
to tighten over the next
12 months
• 40 percent expect no
change
• 7 percent believe
underwriting will loosen
3.6
Risk aversion of your lender clients?
1= very tolerant of “red flags”5 = very risk averse
SURVEY
