As a private lender of construction loans for all property sectors, our team at at Parkview Financial remains optimistic for growth in key commercial real estate markets in 2020. Last year we completed more than $500 million in construction loans – an increase of $165 million over 2018. We also expanded our lending reach from the West to the entire United States. As we talk to and work with developers across the nation and closely follow the financial markets, we see no compelling reason to expect a significant slowdown in commercial construction activity after a favorable 2019. The demand is still there and capital is seeking to place investments in tangible assets.
Many wonder if signs of continuing strength in commercial real estate are too good to be true. Although fewer permits were pulled for for-sale and for-lease multifamily and luxury single-family developments in 2019 than in 2018, a reason for this is that many of those projects were still in progress, and there are gaps between finishing them and the next wave of permits. This is particularly true in Los Angeles as zoning, entitlements and projects have longer timelines. Others point to the significant increase in the costs of materials, labor and land that are causing a continuing rise in construction costs, a potential damper on CRE development lending. Developers are pressuring for bigger loans as costs continue to rise, and some lenders are unable to provide the loan dollars they require. Although this is the case, alternative and more creative lending strategies come into play and developers look to growing markets that have land prices are pro-development/business-friendly.
THE GOOD NEWS
Notwithstanding the challenges, as well as it being an election year, Parkview sees a positive outlook for CRE lending this year. Here’s why:
The economy remains strong, interest rates are low, and investors continue to favor commercial real estate assets. Large US and foreign investors will continue to allocate substantial investment to commercial real estate here.
In Los Angeles alone, more construction loans were arranged in 2019 than over the past nine consecutive years, with a lot of activity in West Hollywood, Hollywood and Koreatown. In the greater LA region, Parkview Financial arranged a number of loans, its most recent being a $19.8 million loan for a major mixed-use project in Temecula.
Cap rates are anticipated to remain stable or even go down, due to the lower cost of debt putting downward pressure on cap rates.
Multifamily assets continue to rise in value and attract capital as demand for rentals continues to increase. US demographic and economic conditions favors rentals, as post-2008 consumers remain cautious about purchasing homes and Baby Boomers continue to downsize from single-family homeownership to smaller rental units. Parkview Financial recently completed a significant $38 million loan for the construction of a 126,500-square-foot, mixed-use multifamily development in Houston that includes more than 20,475 square feet of ground-level retail space. Texas will remain a strong state for new development this year.
Parkview Financial was founded in 2009 by CEO Paul Rahimian. Based in Los Angeles, the direct private lender provides short-term bridge and construction loans secured by first trust deeds to developers throughout the United States. Parkview manages a debt fund that originates approximately $500 million in construction financing each year with loans ranging in size from $5 million up to $100 million. Parkview’s excellent reputation as a private lender has been built on its ability to provide fast, creative financing solutions for borrowers who need more leverage and certainty of execution. Parkview originates loans for property types including Multifamily, Industrial, Office, Retail, Mixed-use, Spec Homes and Entitled land. Learn more at Parkviewloan.com.