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Growth-minded lenders tighten terms of new debt as costs rise

Lender Appetie for Canadian Markets

Lenders are keen on growing their real estate loans in 2023, but their focus is shifting due to rising interest rates and evolving development plans. Here’s a simplified breakdown of what’s happening:

Lender Expectations:

  • 93% of lenders aim to expand their loan portfolios in 2023, a slight decrease from last year.
  • Vancouver tops the Western Canada investment list, with tech, specifically data centres and life sciences, being the primary interest.

Preferred Sectors:

  • Multifamily properties lead the way, given the appeal of rental options amid high homeownership costs.
  • Logistics and warehousing follow closely, maintaining lender confidence.
  • Tech, multifamily, and industrial sectors are expected to grow, unlike other asset types.

Challenges for Some Sectors:

  • Class B office space faces lender concerns, leading to a reduction in exposure plans.
  • Confidence in land deals has dropped significantly, with 52% of lenders raising eyebrows.
  • The condo market might experience a slowdown due to construction cost inflation and increased interest rates.

Changes in Lending Practices:

  • Lenders are tightening underwriting, with 67% requiring greater equity in projects going forward.
  • Industrial deals remain robust, immune to concerns thanks to strong demand for logistics and warehouse spaces.

In essence, lenders are adjusting their strategies in response to economic shifts, with a focus on stable and promising sectors like multifamily and logistics.

Please contact Jared Gibbons, your local realtor, should you have any questions.

 

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