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2016 could mark commercial real estate lender hesitation

Commercial property developers in Maryland and other states may be affected by fiscal trends that prompt lenders to shy away from more speculative developments. According to news sources, a combination of decreased fossil fuel prices, reduced Chinese growth and other factors have worked together to create a climate that could leave developers unable to secure funding quite as readily.

One notable lending trend is that the issuance of commercial mortgage backed securities has slacked off significantly. Some analysts even predict that 2016 will see the creation of new CMBS drop by almost a third. Other factors, like the first Federal Reserve interest rate hike to occur in almost a decade, are reputedly making lenders more wary, and so is an overabundance of properties such as condos and hotels following years of high-volume construction.

Experts say that as regulated lending agencies leave the market, the role of alternative private lenders will increase. Others note that smaller developers without lots of funding are already having trouble holding onto their assets after defaulting on their loans. Loan costs are projected to rise and potentially result in increased numbers of delinquency situations, and the fact that banks were being more stringent about underwriting guidelines as early as 2015 may only exacerbate the situation.

Commercial real estate financing may become more difficult to secure as market factors evolve. Developers who want to build or upgrade properties might have to jump through more hoops than usual to obtain funding from traditional investors. They may find it advisable to meet with an experienced real estate attorney to discuss their options.

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