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.