Developers Tap Non-Bank Sources to Finance Spec Office Projects
November 26, 2019 | Beth Mattson-Teig | National Real Estate Investor
Developers looking to push forward with speculative office projects at this stage of the cycle are finding that they may have to work harder to find capital—and perhaps pay a little more for it.
Financing on speculative office development has tightened in the past 24 months along with concerns about slowing economic growth and what continues to be stagnant performance across the broader national office market. According to the third quarter briefing from research firm Reis Inc., office vacancies rose by 10 basis points to 16.8 percent during the quarter, which is only 80 basis points below the cyclical peak in 2010.
“Right now, there is a lot of caution in the market, which is good, but it is also coupled with a lot of lender appetite across many different silos of lender types,” says Seth K. Grossman, a senior managing director at Meridian Capital Group in Solana Beach, Calif. Although some lenders have moved to the sidelines, others are not afraid of financing new construction and even speculative construction with little or even no pre-leasing in place.
