Todd Harrop, executive vice president and national director of capital markets at Bellwether Enterprise in Columbus, Ohio, believes 2019 will be another opportunistic year for lenders and intermediaries. REBusinessOnline discussed with Harrop the abundance of capital in this market – and how discipline and changes in capital providers’ programs have put these funds to work.
What is the biggest challenge you anticipate in 2019 as an intermediary in commercial real estate?
Much like 2018, we continue to be optimistic about the commercial real estate finance market in 2019. In 2018, we were challenged with a variety of market disruptors including rising interest rates, market volatility, geopolitical risks, and signs of an overall slowing global economy. In 2019, we expect these disruptors to continue.
Furthermore, the debt space remains very crowded as capital flows continue to rise and opportunities have declined due to fewer refinance opportunities. The good news is capital is far from complacent and underwriting remains very disciplined, which should enable the markets to continue to function well.
Where do you see the biggest opportunity for your company in 2019?
In general, I believe there is an increased opportunity for mortgage bankers/intermediaries in 2019. This is due to the fact that there is an abundance of capital, and capital providers’ programs are changing in order to better deploy their capital and manage risks. Having a full-service platform enables us to be product agnostic and identify optimal financing solutions for our borrower clients. Leveraging deep-rooted relationships with our capital providers is important to delivering competitive financing solutions in an efficient manner.
What property sector of commercial real estate will experience the most activity in 2019, and why?
With continued strong job growth, some wage growth, and low unemployment, we expect multifamily to continue to the lead the way, albeit at a tempered pace. We expect activity among the government-sponsored enterprises (GSEs) to remain strong, with production similar to 2018 levels. Many non-GSE lenders have been overweight multifamily post-recovery, and some are looking to diversify further into other property types. For example, strong fundamentals in the industrial sector have led to increased lender demand. Having said that, it’s been hard for lenders to grow their industrial exposure because loan sizes are smaller relative to other property types and much of the Class A product is owned by publicly traded REITs that seldom use secured debt.
What advice are you giving your borrowers to help them maximize their lending strategy in 2019?
Our advice is to continue to be proactive in managing capital needs. As mentioned above, it’s more important than ever to stay in tune with capital availability. Lenders have been very active in recent years and their portfolio concentrations have shifted. While overall performance continues to be strong, many of their needs have changed. Exposure to a broad array of capital and local market expertise is critical to ensuring an optimal execution.