Commercial Report Finds Credit to be ‘Unnecessarily Tight’

Things are looking up in the commercial real estate market, but financing remains a challenge for small businesses, according to the National Association of REALTORS®’ quarterly commercial real estate forecast.

“The wheels appear to be greased for the big players, but not so much for small business,” said Lawrence Yun, NAR’s chief economist. “Despite the improvement for major commercial properties, 52 percent of REALTORS® report they had a commercial transaction fail in the past year due to a lack of financing… In addition, 42 percent of respondents said clients failed to complete a refinancing. Credit for small business remains unnecessarily tight.”

The Commercial Real Estate 2013 Lending Survey, a companion report to the forecast, shows widely-varying access to lending capital depending on property size, with a significant disadvantage for buyers of smaller properties.

Commercial sales volume of major properties valued at $2.5 million and above increased 24 percent in 2012 to $294 billion. However, REALTORS® in the commercial sector reported that 85 percent of their clients’ transactions are for purchases under $2 million—generally small businesses. These transactions are financed largely by private investors, along with local and regional banks, marking a bifurcation in capital availability based on property value, according to NAR.

Commercial members also reported that new and proposed legislative initiatives, as well as regulatory uncertainty for financial institutions, account for the lack of capital in commercial lending for smaller properties.

Source: NAR