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CBRE Sees a Light at the End of the Tunnel for Construction Loans Next Year

Nov. 17, 2023
CBRE says the commercial real estate lending market is beginning to stabilize.

CBRE, the global commercial real estate firm (www.cbre.com), provides a ton of solid market data on the commercial construction market, including information on local office vacancy rates, trends in commercial office leasing and lending activity. 
With the commercial market potentially providing such large revenue opportunities for the electrical market, tracking lending activity in the commercial real estate market is of interest to electrical executives because it provides insight into financing for new construction and office renovations. 
CBRE Lending Momentum Index. CBRE says the commercial real estate lending market is beginning to stabilize, with borrowing costs appearing to have peaked, even as transaction activity remains subdued.
The CBRE Lending Momentum Index, which tracks the pace of CBRE-originated commercial loan closings in the U.S., declined by -3% from Q2 2023 and -47.9% when compared with the strong loan volume in last year’s third quarter. 
“While capital markets headwinds continue, we see signs that lending conditions may be stabilizing for certain asset classes,” said James Millon, U.S. president of Debt & Structured Finance for CBRE, in the press release. “Credit is gradually loosening, cap rates are resetting higher and the Fed’s rate hiking campaign may be near the end, which collectively could pave the way for an uptick in deal volume in the second half of next year.”
Office conversions. CBRE also recently published a report on the number of office buildings being converted to affordable and zero-emission housing. It said that across the 40 markets in the U.S. that it tracks, 60 million sq. ft. of office conversions are planned or in progress, comprising 1.4% of the total U.S. office inventory, up from 1.2% in last year’s fourth quarter.