Market Insights

CrediFi Analysis: Alternative Lenders Up, Banks Down

Alternative lenders are on the rise in the commercial real estate finance market, and a recent upswing in alternative lending appears to be compensating for a roughly equivalent decline in bank lending, a CrediFi analysis has found.

The analysis, which examined a sample of $178.4 billion in commercial real estate loans originated in New York City, Chicago and Boston from Q1 2016 to Q1 2017, found that financing originated by banks dropped nearly 8% in that period.

Bank origination in Q1 of this year fell to less than 70% of CRE financing dollars in the three markets analyzed in our sample. During the same period, commercial real estate financing by alternative lenders increased more than 8% in those markets.

In this analysis, alternative lenders refers to non-bank lenders such as hedge funds, private equity funds, real estate investment trusts, debt funds and pension companies. Insurance companies were analyzed separately and are not included in the alternative lender category.

Commercial real estate lending by insurance providers in our sample remained stable. Non-bank lenders that don’t fit into the above categories, such as government lenders, credit unions and private individuals, were classified as other.

 

All the same, it is worth noting that banks continue to be responsible for most commercial real estate financing.

Just under three-quarters of the $178.4 billion in commercial real estate financing in our sample – 73% – was originated by banks for properties in New York City, Chicago and Boston over the five quarters analyzed.

Though banks continue to be a huge force in the commercial real estate finance market, they – as well as the rest of the industry – would be wise to pay attention to the increasingly significant role alternative lenders are playing.

 

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