Federal Reserve releases survey on bank lending practices. The Fed published their survey on bank lending practices. The survey addressed changes in lending standards, demand and commercial lending, with 73 domestic banks responding. Survey highlights include:
- General easement in lending policies and standards due to increased competition.
- Reported increase tolerance for risk by roughly one-third of the respondents.
- Focus on commercial real estate lending. The survey reports banks eased standards on construction/development, non-farm/residential structures and multi-family loans. The largest number of banks indicated having eased standards on multi-family loans.
- CRE investment sales are up 29% and volume in office, retail and industrial are on the rise. Multi-housing is levelling.
- New issuances of CMBS are up $17 billion ($65 billion YTD as compared to $48 billion in 2013)
- Lender spreads have been reduced due to the volume of loans issued. The Fed’s survey data confirms.
- Construction pricing has fallen by nearly 75 basis points.
- Lenders are offering vacant land loan-to-values as high as 70 percent. Read the article here.
Jones Lang LaSalle publishes “Global Corporate Real Estate Trends” report. JLL published their second biennial report on global CRE trends. The report includes data compiled through surveys and interviews of more than 600 corporate CRE executives from 39 countries. The report highlights five global trends including:
CRE teams are being challenged to impact and add value to a wider range of agenda items. The report calls for improved clarity in priorities for improved employee performance. Further, only 28% of those surveyed regard themselves as “well equipped” to meet demands being placed upon them.
More real estate outsourcing is occurring due to increased demand. JLL reports in-house real estate teams are leveraging outside real estate platforms, with only 8% of those surveyed reporting no out-sourced relationships.
Workplace transformations will be the key to optimized portfolios. The report calls for an improved collaboration between HR, IT, Procurement and Real Estate. 67% of respondents report this transformation is a priority.
REITs Are Hot (Topics). Numerous news outlets including the Wall Street Journal, Boston Globe, NY Times and Bloomberg have reported on REITs this news cycle. Wall Street Journal published an article in October titled “Investors Turn From Once Hot REITs” after negative returns were posted and begged the question “Are REITs Becoming Laggards?” The Wall Street Journal may have a (semi) negative outlook, but dozens of articles were published this week that show a brighter outlook:
The Boston Globe reports the “slide in real estate funds represents a buying opportunity for investors,” and Abby Woodham of Morningstar commented “The valuation is much more attractive now, than it has been in quite some time.” The globe article highlighted Vanguard’s REIT ETF and Schwab’s US REIT ETF.
Bloomberg News reports a “Growth in Non-Traded REIT Investments.” The posting includes an interview with Bob Rice, general managing partner of Tangent Capital Partners on Bloomberg’s “Money Moves” segment. The video interview highlights include:
- REITs pay yield set to pull in nearly $20 billion of new capital this year.
- New players are bringing more transparency, better quality, length of time is improving.
Expect to see REITs as a hot subject in the next 10 days or so, especially with experts such as Jill Cuniff of Edge Asset Management being quite vocal with the idea of investing in speciality REITs within biotech.
Deloitte released a 2014 commercial real estate outlook report, and it rocks! Deloitte reports 2013 has been marked by continued recovery in asset prices, transactions and capital availability. Asset prices are close to 2007 peaks in the major metropolitan markets and transaction activity has improved in the secondary markets. Deloitte also reports private equity and international investor interest has increased in U.S. commercial real estate, which lines up with Colliers numbers which we referenced last week.
The report includes information about a wide range of relevant CRE subjects, including:
Competition and Markets - Evaluates existing industry structure, competitive landscape, and market composition. Globalization and investments with the Americas and Asia Pacific region are highlighted. Page 8 includes synopsis of the Office, Retail, Industrial, Multi-Family sectors.
Lending – Banks are starting to accept higher loan-to-value ratios and are easing standards. See page 14 for information about CRE lending.
Talent – The report points to an age gap within core real estate functions and executive-leadership talent pools. Deloitte makes the case that real estate companies should be more aggressively managing succession plans and should put a stronger focus on developing leadership pipelines.
Company Transformations - Expect 2014 to have transformations in “Business Intelligence,” “Integrated Financial Systems” and “Automization and Shared Services” technologies. (Insert shameless plug here)
Download the (highly recommended) report here.
And in conclusion:
Be Interesting says Goldman Sachs CEO Lloyd Blanfein. Goldman Sach’s posted a video interview with advice for summer interns. The 40 minute interview focuses on Mr. Blanfein’s backstory, changes he has witnessed within the industry and advice. Highlights include:
Changes in access to open infrastructure means faster progress. Mr. Blanfein explains that there access to infrastructure, data, technology and experts means there is a much more level playing field. What could have taken a year and $5 million dollars now takes far less time - $50,000 and one month - because of better access to infrastructure.
It’s just as important to be successful in business and life. He cautions the interns to be a complete person with interests away from work. Mr. Blanfein notes that you need to be interested and interesting to get business done. Business is about relationships, and people want to do business with those they like.
Apparently even investment bankers like Goldman Sachs need work life balance. The interview also shows the only large expenses Goldman Sachs makes are in its people and the real estate they office in. May we all look at HR (or, Goldman Sachs’ “Human Capital” division) as a worthy investment!
See you next week.