2022 Making A Case For Core Lending

Contributors

Tim Stoner
Managing Director, Capital Markets

Alex Rapoport
Executive Director, Capital Markets

Will McIntosh, Ph.D
Global Head of Research

Karen Martinus
Senior Associate, Research

Mark Fitzgerald, CFA, CAIA
Executive Director, Research

March 2022

Summary

The commercial real estate (CRE) debt market has over $5.0 trillion in loans outstanding, making it one of the largest fixed income asset classes, offering investors a vast array of products and strategies. The asset class combines many of the attractions offered by both commercial real estate equity and fixed income; this includes stable, historically strong income returns while maintaining a level of downside protection from real asset exposure and enhanced diversification potential. This paper will focus on the strong historical risk-adjusted performance of CRE debt, highlighting why the current market environment is favorable for investors.

Commercial mortgages are an attractive investment option in today’s market environment where credit standards remain somewhat constrained, borrower demand is high, and underlying real estate fundamentals are healthy. With banks and CMBS lenders struggling to navigate the strict regulatory environment, a gap remains between borrower needs and credit availability.

Consequently, there remains an opportunity for alternative lenders to fill this void, create velocity, and capitalize on the robust demand in the commercial lending sector.