In 2008, the financial crisis caused commercial construction and development to a come to a virtual standstill. Since then, as the economy has slowly recovered, investors have bided their time, hoping for a resuscitation of this vital aspect of the commercial real estate market. That long-awaited rebound may have finally arrived.

According to Michael Bull at National Real Estate Investor, there has been a recent increase in rezoning applications as well as new construction projects for multifamily and commercial properties, including apartments, hotels, and country clubs. Bull also notes that construction costs remain high due in part to both the increased cost of building materials and the higher wages required as the construction workforce has decreased.

Even though construction projects appear to be on the rise, banks and traditional lenders slow to follow suit. Institutional lenders are not providing loans for commercial real estate construction or development. Instead, they continue to reserve their funds for only a few select projects, making the competition for this financing fierce.

The lack of traditional funding combined with increased construction costs means that hard money construction loans can be a borrower’s best option to finance projects that don’t meet the bank’s strict criteria. Private lenders have more flexibility in deciding which projects to finance. And while private financing can be more expensive than traditional lending, it is possible for borrowers to shop around through a loan broker in order to find the best match for their project. (See our blog on hard money loan approval for more information on the loan application process.)

While commercial construction and development continues on its road to recovery, it is not yet clear when, or if, banks will increase their construction financing in the near future. Until then, hard money construction loans are stepping in to fill the gap and help borrowers develop and realize their construction project goals.

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.

Source:

Bull, Michael. “Signs of Life: Development and Construction Finally Picking Up.” National Real Estate Investor. http://nreionline.com/construction/signs-life-development-and-construction-finally-picking.