Waiting for an active year 2022
Our office remained not only “open for business” for 2021, but very busy. We are grateful to all of our customers who contributed to a record year of loan closings for us. While it is certainly difficult at times, we have been able to provide financing for all property types, multiple lender sources and small to medium to large loan sizes. Although most properties are in our MSA, we have followed our clients who have expanded their portfolios nationwide by working with the entire network of Northmarq’s 40 offices across the country.
While multi-family properties continue to shine as our majority of financings, we also remain busy with industrial and retail loans. Our lenders have been able to offer very competitive and favorable loan terms to our clients, who have been through many economic cycles. What is essential for us is to have such a wide range of Life Company lenders active in our market. We appreciate the partnership with these lenders, with whom we have worked for many decades.
Timing is important to minimize volatility
With the pandemic turning into an endemic, we hope the worst is behind us and look forward to some normalcy in 2022. All of our lenders have excellent lending targets and interest rates, although quite volatile, remain at historically low levels. . Timing is important for every trade, and we pride ourselves on being able to react quickly to minimize any volatility. We remain committed to providing underwriting, closing and market intelligence expertise.
Multifamily remains the preferred asset class
Looking ahead to the next few months, we’ll be watching multi-family trends as rental growth and values continue to rise. Occupancy rates remain quite high, above 95% in most markets. The supply of new units is lagging demand, creating a rental growth frenzy as supply chain delays exacerbate shortages. Additionally, the conversion of single-family homes into rental properties is taking on a new form of competition.
Cap rates for multi-family properties are at historic lows and transactions are attracting capital from every conceivable source. Value-added trades are the most sought after with upside potential offering the highest returns to investors. This in turn has led to increased activity by Bridge lenders offering flexible short-term financing options, including variable rate, flexible prepayment structure and interest-only payment options. This trend should continue. Freddie Mac and Fannie Mae capture deals that contain elements of affordability and for their best borrowers. With the increased volume caps for 2022, we expect a more controlled volume flow affecting spread adjustments throughout the year.
Don’t overlook other types of properties
The retail sector recovered somewhat as replacement and displacement of tenants stabilized. Location, location, location is important, as always. There is a transition to services as landlords adjust to tenant resizing and rent adjustments. This trend will continue.
Industrial properties continue to explode on the distribution needs of online shopping. Amazon and many other logistics companies are growing across the country. In the Midwest, we benefit from the transportation networks we support, by land, sea and air. Trains, planes and automobiles provide an excellent network to support industrial sites in our market.
Other property types including offices, hospitality, manufactured homes, mixed-use developments and self-service storage offer lending opportunities, with more specific alternatives on a case-by-case basis from our network .
Loan price increases not unexpected, remain at historic lows
We’ve been in a terrific lending environment for the past few years, with interest rates starting at a 2, then a 3, and now moving closer to the 4% range, with inflationary pressures and the Federal Reserve trying to rein in inflation while allowing GDP growth. While we didn’t want to see rates go up, that was not unexpected given that the economy is strengthening and historically low rates are expected to rise over the past few years. This will get interesting as we go along. Today’s rates are still very desirable rates.
We look forward to another great year providing the best financing alternatives to our customers. It is with great pride that we continue to exceed the expectations of our lenders and clients by providing first-rate service.