Anticipating Changes in 2024: Largo’s Expertise Sheds Light
For commercial real estate owners and investors, 2024 will not be the status quo and understanding where the market is heading is vital. That is where Largo adds value to property owners/borrowers and investors. Our loan advisors are in the market every day utilizing Largo’s strong lending relationships to obtain intel that provides clients with the most competitive financing options available.
Largo Capital will be attending the Commercial/Multifamily Convention and Expo February 11-14, 2024, in San Diego. This annual conference hosts thousands of attendees including lenders of every variety – Life Cos., CMBS, Agency, Debt Funds, Bridge Lenders, and Equity providers, as well as peers, clients, and vendors. Largo will host meetings with 50+ lenders in a three-day period and will walk away with a strong direction on what to expect in 2024. We will use and share that knowledge for the benefit of our borrowers.
Largo Capital’s Top 5 Projections for CRE Finance in 2024
1. Life Companies will be the most competitive lending source in 2024 while banks will continue to service only their existing (top tier) clients or elect to stay out of the finance market altogether. Agency and CMBS will see an uptick in activity, but life companies will still provide the more competitive terms for the loans that fit within their underwriting parameters. In most instances, the DSCR (NOI/Annual Payment) will be the determining factor in calculating loan proceeds. The higher the DSCR the more competitive the loan terms. Largo represents and services loans in-house for 20+ life companies as well as other capital sources.
2. For many, there will be significant funding gaps on loans that are coming due because of increased cap rates, higher interest rates, and tougher underwriting standards. Owners that cannot find lenders willing to refinance their loans may have to sell or hand back the keys.
3. Cash is King! Experienced commercial real estate owners are waiting on the sidelines to take advantage of opportunities where existing owners will need to sell their properties or require more equity for liquidity reasons. The ability to react quickly is paramount. With tighter loan parameters, fewer lenders, and higher rates there will be opportunities for acquisitions in 2024.
4. Retail is making a comeback; Multifamily will remain steady even as there are markets experiencing a reduction in rent growth and increased concessions; Industrial is softening but still a viable product type; Hotels will remain steady in 2024 as people continue to put a high priority on travel. In addition, Property Improvement Plans (PIPs) that were extended because of COVID are coming due and will require financing. Most office deals (other than medical) will continue to be highly scrutinized and the most difficult to property type refinance. Transitions from office to self-storage, data centers and multifamily uses are anticipated but the costs may be too prohibitive for some properties.
5. Climate change will continue to impact the costs and risks associated with commercial real estate. Property insurance specifically will remain an issue due to a shrinking number of insurers willing to provide coverage, increased premium costs and potential changes in regulation for future development. The industry in general will need to address this issue.
Please contact Largo to discuss any financing opportunities!