The commercial real estate (CRE) market seems to be on its way to a full recovery as is shown by the 27 percent increase in national transaction volume, which has returned the market to 2004-2005 levels. The local Denver CRE market has also seen a remarkable recovery with last year’s transaction volume increased by 30 percent ($6.1 billion). As a result, Real Capital Analytics has moved the Denver market up on its national ranking list, from 24th in 2010 to 12th in 2012.

Hard money lenders bridge the gap

When banks virtually stopped lending in 2008, it was hard money lenders who stepped in to fill the lending gap. Even though banks have recommenced lending since 2010, these private lenders have continued to claim an increasing percentage of the commercial real estate market since qualified borrowers are still being turned away by the banks. Private lenders also maintain this larger share of the market through their willingness to lend on vacant and distressed properties in addition to the stabilized, income-producing properties that banks lend on.

Throughout the recession, bridge loans have enabled serious real estate investors to realize substantial returns on their investments. Corey Curwick Dutton, a loan office with Private Money Utah, speculates that “In fact, without the willingness and ability of private money lenders to make loans during 2008 and 2009, the real estate market would certainly not have recovered as quickly as it did.”

Pent-up demand fuels recovery

Eric L. Tupler, senior managing director of HFF Denver, points to the pent-up equity of real estate investment trusts (REITs), commercial mortgaged-back securities, life insurance companies, and agencies like Fannie Mae and Freddie Mac as other sources of inexpensive capital that has helped to fuel the CRE market’s recovery.

In an article in the Colorado Real Estate Journal, Tupler says “Although there still remains uncertainty of rising interest rates and the beginning of new supply in the marketplace, 2013, like 2012, is expected to be a nearly ‘perfect’ capital markets environment given the abundance and low cost of available capital.”

It is hopeful that as private lenders continue to provide affordable loans for CRE investors, these injections of capital will ensure a sustainable recovery for the CRE market, which should, in turn, reward both lenders and investors with handsome ROIs.

This blog was written by Bob Amter, President of Montegra Capital Resources, LTD., a Colorado hard money lender.  [google_authorship] has been in the private capital lending business for 41 consecutive years.

Sources:

Dutton, Corey Curwick. “Private Money Lenders Have Fueled the Real Estate Recovery.” The Niche Report 29 January 2013.

Tupler, Eric L. “Cheap Capital, Pent-Up Demand Are Driving the CRE Recovery.” Colorado Real Estate Journal 6-13 April 2013.

This blog was written by Bob Amter, President of Montegra Capital Resources, LTD., a Colorado hard money lender.  [google_authorship] has been in the private capital lending business for 41 consecutive years.