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CREFC's June 2024 Monthly CMBS Loan Performance Report

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ESG Disclosure Ramps Up, Increasingly Important in M&A

July 23, 2024

Recent surveys from top accounting firms, Deloitte and KPMG, demonstrate that companies are increasingly focused on ESG-related disclosure and reporting.

• CREFC’s 2024 Sustainability Survey, specific to the CRE finance industry, also shows that nearly 88% of respondents have or are developing a sustainability framework.

According to Deloitte’s survey, nearly 75% of public companies anticipate investing in new technology to help improve their ESG disclosure capabilities over the next year. Data quality remains the top challenge with respect to reporting.

• Survey respondents included 300 executives, among them senior finance, accounting, sustainability, and legal professionals, at publicly owned companies with revenue of at least $500 million.

Furthermore, according to KPMG, respondents to a recent survey (600 active dealmakers from 35 geographies) report an increased importance of ESG due diligence over the past 12 to 18 months:

• 80% indicate that ESG considerations are on their M&A agenda;
• 45% of surveyed investors share that a material ESG due diligence finding had significant deal implications; and
• 55% of survey respondents are willing to pay a premium of between 1-10% for assets with high ESG maturity.

The bottom line: While Federal regulation such as the Securities and Exchange Commission’s (SEC) climate reporting requirements face serious challenges, a focus on sustainability continues to move forward at the corporate level.

Additionally, as Sustainable Fitch reports, “individual states have stepped in and now play a significant role:"

“Rules being proposed in the states of Illinois and New York are positioned to expand mandatory climate disclosure requirements to thousands of U.S. entities and entities doing business in the U.S., beyond what has already been achieved since the passing of California’s climate rules.”

CREFC’s Sustainability Initiative continues to closely track sustainability-related regulatory developments at the Federal and, where significant, state levels.

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White House Proposes National 5% Rent Cap

July 23, 2024

Last week, the White House officially announced a proposal to cap rent growth at 5% on multifamily properties owned by large landlords. As written, Congress would need to enact Biden’s proposal via a change in the tax code.

• On July 22, CREFC and other real estate organizations sent a letter to Biden opposing the rent control proposal.

Why it matters: The proposal, announced at an event last week in Nevada, is part of a larger initiative to reduce housing costs, which President Biden referenced at the June presidential debate and the NATO press conference earlier this month. The move also follows the recent Federal Housing Finance Agency announcement on tenant protections for GSE multifamily loans.

By the numbers: According to the White House’s fact sheet, the most recent plan includes the following initiatives:

• Legislation forcing corporate landlords to choose to either cap rent increases on existing units at 5% or risk losing accelerated depreciation for federal tax;
• Repurposing public land sustainably to build additional affordable housing units; and
• Rehabilitating distressed housing, building more affordable housing, and revitalizing neighborhoods.

Go deeper: The rent control squarely targets “corporate landlords”, who have been a continual punching bag for the Biden administration. Biden frames the proposal as “anti-gouging” as opposed to traditional rent control, as proposed in a 2021 NYU Furman Center Study.

If enacted, the rent control legislation would operate as follows:

• Coverage: Applies to landlords with more than 50 units in their portfolio;
• Exceptions: Exempts new construction and substantial renovation or rehabilitation;
• Rent Cap Tradeoff: Landlords would be eligible for existing accelerated depreciation only if rent growth is capped at or below 5% annually. The fact sheet does not provide details on what would be included in the 5% number, but the administration’s crusade against “junk fees” would suggest that other costs could be lumped in.
• Time frame: The limitations would apply in 2024, 2025, and 2026.

Last week’s announcement includes a directive to the Bureau of Land Management to assess surplus federal land that can be repurposed to build more affordable housing across the country. This would be in addition to other initiatives to examine unused federal buildings.

Yes, but: As covered in the letter to Biden, CREFC and other trades have repeatedly opposed the Biden Administration’s attempt to enact nationwide rent control, in particular, via FHFA and the GSEs.

• “Rent control policies have proven time and again to increase rents, reduce the capital needed to boost the supply of housing, and ultimately hurt renters today and in the future.” Real Estate Coalition Letter to President Biden.
• Instead, the coalition supports production and cost-reduction measures designed to increase the overall supply of housing.
• Click here for yesterday’s letter to Biden.
• Click here for our previous joint letter to FHFA on the issue of rent control.

The bottom line: The rent control proposal is unlikely to be enacted this year in a divided Congress, but we expect the White House to continue implementing tenant-focused policies via regulation and FHFA.

• However, the use of the tax code to implement a rent cap could be more easily passed via the “reconciliation process” if Democrats were to win the House, Senate, and Presidency.

Contact David McCarthy (dmccarthy@crefc.org) or Sairah Burki (sburki@crefc.org) with questions. 

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Biden Bows Out; Dems Rally to Harris

July 23, 2024

After growing pressure from Democratic officials, donors, staff, and lawmakers, President Joe Biden officially withdrew from the presidential race.

• Biden quickly threw his support behind Vice Presidential Kamala Harris for the Democratic nomination.
• Harris declared her intent to run and quickly wracked up major endorsements from likely challengers and party leaders.
• From a policy perspective, Harris will begin to define herself in the race. In 2019-2020, she was more progressive on some issues than Biden, but she never had to pivot to a general election message.

Why it matters: The move upends an already tumultuous race, but allows Democrats to move past the questions of Biden’s age and refocus their message. See our separate story on Biden’s polling numbers since the debate.

What they’re saying: The timing is short, but a nomination battle is looking unlikely as Harris consolidates support from different wings of the party. As of Monday evening, the endorsements were as follows:

• Harris quickly locked in endorsements from Congressional Progressive Caucus Chair Pramila Jayapal (D-CA), New Democrat Coalition Chair Annie Kuster (D-NH), the Congressional Black Caucus, Congressional Hispanic Caucus Chair Nanette Barragán (D-CA), and progressive star Rep. Alexandria Ocasio-Cortez (D-NY).
• Numerous senators also backed Harris: Elizabeth Warren (D-MA), Patty Murray (D-WA), Mark Warner (D-VA), Mark Kelly (D-AZ), Kirsten Gillibrand (D-NY), Chris Murphy (D-CT), Tina Smith (D-MN), John Fetterman (D-PA), Dick Durbin (D-IL), and Sherrod Brown (D-OH), among others.
• Potential challengers also rallied to Harris, including Gov. Gavin Newsom (D-CA), Gov. Josh Shapiro (D-PA), Gov. Andy Beshear (D-KY), Gov. J.B. Pritzker (D-IL), Gov. Wes Moore (D-MD), Gov. Phil Murphy (D-NJ), Gov. Gretchen Whitmer (D-MI), and Transportation Secretary Pete Buttigieg.
• Top Democratic congressional leadership, including Senate Majority Leader Chuck Schumer (D-NY), House Minority Leader Hakeem Jeffries (D-NY), and former House Speaker Nancy Pelosi, released statements following the Sunday announcement but did not mention or endorse Harris. However, Pelosi endorsed Harris on Monday and the others could follow suit in short order.
• Former President Barack Obama, reportedly a key figure in the campaign to push Biden out, has not endorsed Harris. Former President Bill Clinton and 2016 nominee Hillary Clinton quickly endorsed Harris.

What’s next: Biden has released his delegates and the campaign has officially switched to “Harris for President.” The convention runs from August 19 to 22.

• Depending on what challengers emerge, Democrats may convene some pre-convention process or forum for candidates.
• The vice presidential candidate speculation has begun, with names like Sen. Mark Kelly (D-AZ), Gov. Roy Cooper (D-NC), and Gov. Josh Shapiro (D-PA) being floated.
• Sen. Joe Manchin (I-WV), who left the Democratic party earlier this year, briefly flirted with re-joining to run at the convention. He later confirmed he would not run for the nomination.

The bottom line: This is a developing story, but the positive reaction from donors, elected Democrats, and Democratic voters point to Harris being the nominee.

Contact David McCarthy (dmccarthy@crefc.org) with questions.

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Lawmakers Want to Oversee AI Adoption by Financial Services, Housing Industries

July 23, 2024

A report from a bipartisan working group in the House Financial Services Committee (HFSC) examined the use of artificial intelligence (AI) in financial services and housing industries. The group’s early findings were outlined in a July 18 report titled “AI Innovation Explored: Insights into AI Applications in Financial Services and Housing.”

• AI Working Group. Chair Patrick McHenry (R-NC) and Ranking Member Maxine Waters (D-CA) in January announced the bipartisan Working Group on Artificial Intelligence, equally divided between 12 Republicans and Democrats.
• The AI Working Group’s overarching goal was to consider the sector-specific risks of AI and examine the sufficiency of the existing statutory and regulatory framework.
• Lawmakers conducted a series of roundtable meetings focused on how financial services use AI, related technological developments, and regulatory implications associated with AI.

Key takeaways from the AI Working Group’s roundtable meetings include:

Regulators said regulated entities are expected to follow all laws, including anti-discrimination and other consumer protection laws, in a “tech-neutral manner.”

• The Federal Housing Finance Agency told lawmakers that the government-sponsored entities have explored the use of AI and how it can help make homeownership more attainable. However, the regulator emphasized the importance and need for a comprehensive and standardized set of data before employing AI.
• Regulators “generally noted that the use of AI did not absolve entities from complying with anti-discrimination laws and other consumer protection laws.” While some agencies said they did not need federal legislation from Congress to manage unique challenges related to AI, others indicated that legislation could be helpful.

Capital markets participants are taking a “measured approach” to implementing AI because of the regulated nature of their industry and current requirements.

What they're saying:

• Participants, including a securities exchange and a broker-dealer firm, said AI is useful for market research, synthesizing large quantities of data, and verifying know-your-customer information.
• One industry participant warned widespread adoption of certain AI models may encourage “herd-like behavior” in capital markets.
• Housing and insurance businesses, including a lender and credit underwriter, said they are deploying AI to underwrite mortgages and insurance policies, screen tenants, and perform data analytics that guide responses to consumers.

Yes, but: While AI offers benefits and conveniences, it has presented challenges related to fair housing and consumer protection.

• One participant told lawmakers that AI tools allow large property manager employees to manage and maintain up to 20 apartment buildings at a time.
• AI is helping developers to identify the most productive plots of land to build on based on local land-use requirements.

Financial Institutions and Nonbank Firms.

• Discussions also focused on specific use cases by financial institutions of all sizes, specifically in loan underwriting, customer service, fraud detection, and debt collection.
• A second panel focused on the AI lifecycle at a financial institution or nonbank, from acquisition of the technology to development and integration. Members and panelists discussed how financial institutions use AI to comply with anti-discrimination laws, as well as the need for cybersecurity and privacy safeguards.

What’s next: Given the critical role of the financial and housing markets, committee staff recommended the Committee should serve in a leading role in overseeing AI’s adoption. To that end, the report recommends the committee:

• Ensure regulators apply and enforce existing laws, including anti-discrimination laws, and assess regulatory gaps as market participants adopt AI
• Ensure that financial regulators have the appropriate focus and tools to oversee new products and services
• Add a chief AI officer at each regulator to oversee the agency’s approach to AI, including risk mitigation processes
• Continue to focus on how to reform data privacy laws given the importance of data, especially consumer data, to AI

Please contact Aleksandrs Rozens (arozens@crefc.org) for additional questions.

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Analysis: Biden Pre-Dropout Polling 

July 23, 2024

As covered above, President Joe Biden announced on Sunday that he would exit the 2024 presidential race, ending weeks of speculation about his candidacy in the wake of a poor performance at the June 27 debate.

However, polling results in the race remained more stagnant than might have been expected.

• Former President Trump had gained on President Biden in every swing state, except North Carolina, but only by an average of 1.1%.
• These gains in polling for Trump and subsequent doubts about President Biden’s health led him to drop out of the race on Sunday.
• As the standard margin of error is 3% to 5%, this polling increase for Trump had pushed Nevada, Arizona, and North Carolina out of margin-of-error territory.
• Trump, who held an average lead of 1.5%, nationally on June 27, now has a 3% lead. Still, Trump’s increased polling average in the swing states (1.1%) runs behind his increase in national polls (1.5%).

Source: RealClearPolitics

There have been a few names mentioned along with Vice President Harris as possible replacements to Biden on the Democratic ticket.

• Other potential Democratic candidates include Gov. Josh Shapiro (PA); Gov. Andy Beshear (KY); Gov. Roy Cooper (NC); Gov. Gretchen Whitmer (MI); Gov. J.B. Pritzker (IL); and Gov. Gavin Newsom (CA). Click here for more info.
• By the numbers: In a national poll conducted last week by CBS, it appears that Harris is the best equipped to win out of all possible Democratic contenders mentioned. However, Trump still leads her in a hypothetical matchup by 3 percentage points, as he garners 51 % of the vote, while she receives 48%.
• Swing-state polling with hypothetical matchups is sparse, but additional data is expected in the coming weeks. The popular polling website 538 has the latest.

However, with President Biden’s exit from the race, there is very little precedent to go on from here. If Vice President Harris wins the nomination at the Democratic Convention, she will have around 75 days to run as the party’s nominee against Former President Trump.

The bottom line: The true test of presidential polling will be in mid- September. By then, Harris or whoever the Democrats officially select as their nominee will be evident and voters will begin to make their final decision.

Please contact James Montfort (jmontfort@crefc.org) with any questions.

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Capital Markets Update Week of 7/23

July 23, 2024

Private-Label CMBS and CRE CLOs

One CMBS transaction priced last week:

• WFCM 2024-5C1, a $731.9 million conduit backed by 32 five-year loans from Wells Fargo and six other contributors

According to Commercial Mortgage Alert, nine additional offerings totaling ~$8 billion are currently in various stages of marketing, including a $1 billion CRE CLO from Prime Finance.

Year-to-date private-label CMBS and CRE CLO issuance totaled $50.8 billion, well ahead of the $21.7 billion for the same period last year.

Spreads Largely Unchanged

• Conduit AAA and A-S spreads were unchanged at +100 and +140. YTD, AAA and A-S spreads are tighter by 16 bps and 25 bps, respectively.
• Conduit AA spreads were wider by 20 bps at +170, while A spreads were unchanged at +220. YTD AA and A spreads are tighter by 55 bps and 155 bps, respectively. ­
• Conduit BBB- spreads were unchanged at +575. YTD, BBB- spreads have tightened by 325 bps.
• SASB AAA spreads were unchanged at +150 to +158, depending on property type. They have narrowed from +160 to +188 at the start of the year.
• CRE CLO AAA spreads were unchanged at +170 / +175 (Static / Managed). BBB- spreads were also unchanged at +575 / +575 (Static / Managed).

Agency CMBS

• By the numbers: Agency issuance totaled $2.5 billion last week, consisting of $1.3 billion in Fannie DUS, $861.2 billion in Freddie K and Multi-PC transactions, and $301.7 million in Ginnie transactions.
• Year-to-date agency issuance totals $54.6 billion, 16% lower than the $65.2 billion for same-period 2023.

The Economy, the Fed, and Rates…

Economic Data

• Initial jobless claims increased by 20,000 to 243,000 for the week ended July 13 – the highest level since early May – indicating a softening labor market. Continuing claims also rose, reaching 1.87 million, the highest since November 2021. The unemployment rate stands at 4.1%, up from 3.6% a year ago.
• Retail sales excluding autos rose by 0.4% in June, the highest in three months. Control-group sales, which exclude food services, auto dealers, building materials, and gasoline stations, advanced by 0.9%, matching the largest increase since April 2023. Both measures indicate a resilient consumer despite today’s elevated interest rates.
• New home construction increased by 3% in June to a 1.35 million annualized rate, driven by a 19.6% surge in multifamily construction. Single-family housing starts fell to an eight-month low, reflecting continued challenges in that market due to high rates and elevated construction costs.
• Industrial production posted back-to-back gains for the first time since 2021, with a 0.6% increase in June and a revised 0.9% gain in May. Factory output increased 0.4%, with gains in autos, electrical equipment, appliances, and nondurable goods.
• The second-quarter GDP report, expected on July 25, is forecasted to show an annualized growth rate of 1.8%. While that would be a slight pick-up from the first-quarter rate of 1.4%, it would be below the rapid growth seen at the end of last year.

Fed Policy

• Fed officials have signaled that rate cuts are "getting closer," with a possible cut in September, depending on upcoming economic data. The central bank faces a delicate balancing act. Cutting rates too soon could risk reigniting inflation, while waiting too long could exacerbate economic slowdown and rising unemployment.
• Yes, but: With inflation trending down and the labor market cooling, some Fed officials believe a rate cut is warranted sooner rather than later to avoid further economic slowdown. Historical data show that once unemployment starts rising, it tends to continue increasing, which supports the case for preemptive rate cuts. Investors already see a rate cut in September as a near certainty and are pricing in two or three quarter-point cuts this year.
• The upcoming presidential election adds another layer of complexity to the Fed’s calculus. Donald Trump issued a stark warning last week to the Fed not to cut its policy rate before the election, saying in an interview with Bloomberg that it was “something that they know they shouldn’t be doing.” Fed officials emphasized their commitment to data dependency and policy decisions independent of political influence.

Treasury Yields

• The 2-year Treasury yield rose by 6 bps to 4.51% over the past week, reversing a three-week streak of falling yields. The 10-year Treasury yield also increased by 6 bps on the week to 4.24%, ending a two-week streak of falling yields.
• A "steepener" trade has gained popularity among hedge funds, betting on short-term yields to fall faster than long-term yields, with the growing prospect of Donald Trump winning the presidential election. Investors have been putting on positions in anticipation that the former president’s tax-cutting and pro-trade tariff agenda could eventually lead to higher inflation and a greater supply of longer-dated government bonds.
• The bottom line: Since the presidential debate on June 27, the steepener trade has paid off, with the 2-year yield falling by roughly double the drop in the 10-year (prices move inversely to yields).

You can download CREFC’s one-page MarketWatch with statistics covering the economy and the CRE debt capital markets here.

Contact Raj Aidasani (raidasani@crefc.org) with any questions.

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CREFC's 2Q 2024 Sentiment Index Indicates Heightened Caution Amid Continued Economic Uncertainty

July 22,2024

New York, July 22, 2024 – The CRE Finance Council (CREFC), the industry association representing the nearly $6 trillion commercial and multifamily real estate finance industry, today released the results of its Second-Quarter 2024 (2Q 2024) Board of Governors (BOG) Sentiment Index survey. Conducted between June 26, 2024, and July 11, 2024, this survey has provided critical insights into the sector since its inception in the fourth quarter of 2017.

The 2Q 2024 Index decreased to 102.4, a 3% decline from the previous quarter’s 105.4. This change reflects growing caution in the economic outlook and the ongoing impacts of higher interest rates.

Key Highlights from the 2Q 2024 Core Questions:

The survey’s core questions revealed significant changes in expectations and insights:

• Economic Outlook: Confidence in the U.S. economy has waned, with only 11% of respondents expecting better performance over the next 12 months, down from 24% in the previous quarter.
• Federal Policy Impact: Neutral sentiment toward federal legislative and regulatory actions increased to 67%, while negative sentiment decreased to 26%.
• Mortgage and Cap Rates: An optimistic shift, with 41% of respondents viewing the impact of rates positively, compared to 31% in the prior quarter.
• CRE Fundamentals: Stability is expected, with 24% anticipating improvement, consistent with the previous quarter.
• Transaction Activity: Demand is expected to remain strong, with 54% expecting increased investor demand, consistent with the prior quarter (55%).
• Financing Demand: While still robust, expectations for borrower demand slightly decreased to 65% from 69%.
• Liquidity: Expectations for improved liquidity fell to 46%, compared to 57% in the prior quarter.
• CMBS Market: Positive sentiment toward CMBS and CRE CLO demand decreased to 43% from 51%.
• Overall Sentiment: Industry sentiment has moderated with 61% neutral and only 22% positive, down from 35% in the prior quarter.

Observations from Additional Topical Questions:

The additional questions in the 2Q 2024 Sentiment Index provided deeper insights into critical areas affecting the industry, particularly in response to macroeconomic changes and industry-specific challenges.

The survey results indicate a varied response to the sharp increase in CMBS issuance, primarily driven by single-asset single-borrower (SASB) CMBS transactions. While 37% of respondents anticipate continued growth in SASB issuance, reflecting sustained market confidence, a larger segment of 48% expects a stabilization in SASB issuance volume, with a predicted shift toward more traditional conduit transactions.

Regarding the upcoming presidential election, a significant majority (61%) of the respondents believe a victory by former President Trump would be more beneficial for CRE finance. The survey reveals a stark contrast in sentiment, with only 11% favoring a Biden victory and a notable portion (20%) viewing the outcomes of the election as equally positive or negative.

High interest rates and valuation uncertainties continue to strain lending markets, particularly impacting maturing loans across balance sheet and CMBS portfolios. Climate risk and insurance challenges are emerging as significant concerns, which are expected to gain prominence in the coming year. Additionally, the implications of recent legal decisions, such as the Chevron case, and potential changes in lending programs and underwriting criteria for Fannie Mae and Freddie Mac are being closely monitored for their potential impacts on the industry.

Lisa Pendergast, Executive Director of CREFC, remarked, "The 2Q 2024 survey results reflect an industry forging its way through significant uncertainty. As the industry navigates these challenging waters, its resilience and ability to innovate will be key to capitalizing on emerging opportunities while mitigating potential risks.”

About CREFC’s Board of Governors Sentiment Index

The CRE Finance Council (CREFC) is the trade association for the commercial real estate finance industry. Approximately 400 companies and 19,000 individuals are members of CREFC. CREFC’s members serve a critical role in the US economy by financing office buildings, industrial and warehouse properties, multifamily housing, retail facilities, hotels, and other types of commercial and multifamily real estate.

Over 50 senior executives in the commercial real estate finance markets represent CREFC’s Board of Governors and hail from every sector of the commercial real estate lending and mortgage-related debt investing markets. CREFC Governors include balance sheet and securitized lenders, loan and bond investors, mortgage bankers, private equity firms, loan servicers, rating agencies, attorneys, accountants, and others. CREFC’s Governors serve up to six years on CREFC’s Board and are all senior members in their firms and the industry.

CREFC’s BOG Sentiment Index aims to gauge quarter-to-quarter shifts in market conditions for the CRE finance market and the outlook for the future. The survey consists of nine core questions and additional topical questions (not factored into the BOG Index) and was first administered in 2017. The Sentiment Index equally weighs the responses to each question and then sums those weighted responses to create a single index.

Contact:

Aleksandrs Rozens

arozens@crefc.org

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CREFC's 2Q 2024 Sentiment Index Indicates Heightened Caution Amid Continued Economic Uncertainty

July 22, 2024

New York, July 22, 2024 – The CRE Finance Council (CREFC), the industry association representing the nearly $6 trillion commercial and multifamily real estate finance industry, today released the results of its Second-Quarter 2024 (2Q 2024) Board of Governors (BOG) Sentiment Index survey. Conducted between June 26, 2024, and July 11, 2024, this survey has provided critical insights into the sector since its inception in the fourth quarter of 2017.

The 2Q 2024 Index decreased to 102.4, a 3% decline from the previous quarter’s 105.4. This change reflects growing caution in the economic outlook and the ongoing impacts of higher interest rates.

Key Highlights from the 2Q 2024 Core Questions:

The survey’s core questions revealed significant changes in expectations and insights:

• Economic Outlook: Confidence in the U.S. economy has waned, with only 11% of respondents expecting better performance over the next 12 months, down from 24% in the previous quarter.
• Federal Policy Impact: Neutral sentiment toward federal legislative and regulatory actions increased to 67%, while negative sentiment decreased to 26%.
• Mortgage and Cap Rates: An optimistic shift, with 41% of respondents viewing the impact of rates positively, compared to 31% in the prior quarter.
• CRE Fundamentals: Stability is expected, with 24% anticipating improvement, consistent with the previous quarter.
• Transaction Activity: Demand is expected to remain strong, with 54% expecting increased investor demand, consistent with the prior quarter (55%).
• Financing Demand: While still robust, expectations for borrower demand slightly decreased to 65% from 69%.
• Liquidity: Expectations for improved liquidity fell to 46%, compared to 57% in the prior quarter.
• CMBS Market: Positive sentiment toward CMBS and CRE CLO demand decreased to 43% from 51%.
• Overall Sentiment: Industry sentiment has moderated with 61% neutral and only 22% positive, down from 35% in the prior quarter.

Observations from Additional Topical Questions:

The additional questions in the 2Q 2024 Sentiment Index provided deeper insights into critical areas affecting the industry, particularly in response to macroeconomic changes and industry-specific challenges.

The survey results indicate a varied response to the sharp increase in CMBS issuance, primarily driven by single-asset single-borrower (SASB) CMBS transactions. While 37% of respondents anticipate continued growth in SASB issuance, reflecting sustained market confidence, a larger segment of 48% expects a stabilization in SASB issuance volume, with a predicted shift toward more traditional conduit transactions.

Regarding the upcoming presidential election, a significant majority (61%) of the respondents believe a victory by former President Trump would be more beneficial for CRE finance. The survey reveals a stark contrast in sentiment, with only 11% favoring a Biden victory and a notable portion (20%) viewing the outcomes of the election as equally positive or negative.

High interest rates and valuation uncertainties continue to strain lending markets, particularly impacting maturing loans across balance sheet and CMBS portfolios. Climate risk and insurance challenges are emerging as significant concerns, which are expected to gain prominence in the coming year. Additionally, the implications of recent legal decisions, such as the Chevron case, and potential changes in lending programs and underwriting criteria for Fannie Mae and Freddie Mac are being closely monitored for their potential impacts on the industry.

Lisa Pendergast, Executive Director of CREFC, remarked, "The 2Q 2024 survey results reflect an industry forging its way through significant uncertainty. As the industry navigates these challenging waters, its resilience and ability to innovate will be key to capitalizing on emerging opportunities while mitigating potential risks.”

For further details on the CREFC 2Q 2024 BOG Sentiment Index and the full report, please click here. 

About CREFC’s Board of Governors Sentiment Index

The CRE Finance Council (CREFC) is the trade association for the commercial real estate finance industry. Approximately 400 companies and 19,000 individuals are members of CREFC. CREFC’s members serve a critical role in the US economy by financing office buildings, industrial and warehouse properties, multifamily housing, retail facilities, hotels, and other types of commercial and multifamily real estate.

Over 50 senior executives in the commercial real estate finance markets represent CREFC’s Board of Governors and hail from every sector of the commercial real estate lending and mortgage-related debt investing markets. CREFC Governors include balance sheet and securitized lenders, loan and bond investors, mortgage bankers, private equity firms, loan servicers, rating agencies, attorneys, accountants, and others. CREFC’s Governors serve up to six years on CREFC’s Board and are all senior members in their firms and the industry.

CREFC’s BOG Sentiment Index aims to gauge quarter-to-quarter shifts in market conditions for the CRE finance market and the outlook for the future. The survey consists of nine core questions and additional topical questions (not factored into the BOG Index) and was first administered in 2017. The Sentiment Index equally weighs the responses to each question and then sums those weighted responses to create a single index.

Contact:

Raj Aidasani

raidasani@crefc.org

Contact 

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