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News release

CHICAGO, IL

Bold Commercial Real Estate Lending Expectations for 2012 Capital Availability


CHICAGO, Feb. 21, 2012 — Jones Lang LaSalle today unveiled the following final compendium of its commercial real estate lending analysis, conducted in partnership with Penton Media Research, which produced a proprietary survey that compiled feedback from 186 borrowers and 136 lenders that together comprise a total median $73.3 million in commercial real estate asset value.  In the survey, lenders reported positive expectations for 2012 funding aims including a 12 percent uptick in expected capital placement this year. The borrowers surveyed also revealed a greater need for capital with 40 percent reporting an expectation to increase borrowing in 2012. The survey’s methodology conforms to generally accepted marketing research methods, practices and procedures.

The survey reveals there is a greater amount of capital heading into the market, expected from nearly all lending sources in 2012. The findings cover key lending and borrowing perspectives for 2012 in the following highlights:

Key Borrower Sentiment Takeaways
  • Borrowers find commercial banks are the most active lenders, as 77 percent of respondents borrowed from banks in 2011. One in three borrowed from life companies and one in four borrowed from private equity investors in 2011, signaling a trend expected to increase in 2012 as more borrowers seek funds from alternative sources.
  • Most borrowers (74 percent) are sourcing primary loans or short-term construction loans (41 percent) followed by 30 percent sourcing a line of credit.
  • The debt process is improving as commercial real estate borrowers report feeling satisfied with the certainty of execution from lenders, which they prioritize as the most important factor when seeking a loan origination provider.
  • Expectations for an increase in long-term mortgage rates have subsided. Only 57 percent of borrowers predict an uptick in interest rates in 2012, while 78 percent thought rates would rise in 2011.
  • Borrowers need more debt in 2012, as 40 percent expect their total portfolio debt to increase in 2012, up six percent over 2011 increase expectations. 
  • The health of the United States economy has the greatest impact on borrowers’ ability to obtain financing.

Key Lenders’ Expectations Takeaways\

  • Financing in 2011 increased an average 11 percent from 2010. Respondents expect 2012 financing availability to increase 12 percent over 2011.
  • Apartments represent the best investment opportunities today as 76 percent chose that product type.  Conversely, another 48 percent of lenders worry the most about hotel loans.
  • Lenders indicated that 62 percent of loans closed in 2011 were for long-term and 38 percent were for short-term loans. Those percentages aren’t expected to move much with 2012 long-term expectations at 64 percent and short-term at 36 percent.
Outlook
The outlook for financing in the commercial real estate markets is broadly optimistic as 56 percent of lenders and 44 percent of borrowers expect credit to be more available in the next 12 months. There is little doubt that borrowers are feeling more optimistic about the capital available for their refinancing, acquisition and even construction needs, having met lenders with more appetite for risk as the commercial real estate credit markets continue to improve. Lenders also have bold ambitions to place more capital into real estate mortgages in 2012, setting up what should be a strong transaction market environment in 2012.

Jones Lang LaSalle’s Managing Director Dave Hendrickson details the headway life companies have made in lending in 2011 and into 2012 as well as the new sectors now receiving attention for construction lending. He also weighs in on what he thinks could be the biggest threat to the market in 2012. LINK: http://youtu.be/pNEvrZdCQmg

The future looks bright with little worry that rising interest rates could derail near-term progress. Jones Lang LaSalle’s survey indicated that borrowers and lenders expect mortgage rates to rise 0.6 to 0.7 basis points in 2012. Jones Lang LaSalle’s Wes Boatwright doesn’t expect rates to rise this year but he does see borrowers facing an environment where commercial banks will continue to use recourse loans. On the upside, he says there should be a stronger level of capital availability this year. LINK: http://youtu.be/u2ao6fRDz3o

Report Resources
To review details on Jones Lang LaSalle’s capital availability research, the firm issued its primary findings on borrowers’ expectations on February 6, and a secondary survey report on lenders’ expectations on February 16.

To view more of Jones Lang LaSalle’s expert viewpoints from the Mortgage Bankers Association conference in Atlanta earlier this month, including executive interviews from many of the nation’s leading lenders, watch Jones Lang LaSalle’s video interviews on our YouTube playlist:  http://www.youtube.com/playlist?list=PL8D886FFEC4A3B6DF

For more news, videos and research resources on Jones Lang LaSalle, please visit our U.S. media center Web page.  Bookmark it here:  http://www.us.am.joneslanglasalle.com/UnitedStates/EN-US/Pages/News.aspx

Jones Lang LaSalle Capital Markets is a full-service global provider of capital solutions for real estate investors and occupiers. The firm’s in-depth local market and global investor knowledge delivers the best-in-class solutions for clients — whether a sale, financing, repositioning, advisory or recapitalization execution. In 2010 alone, Jones Lang LaSalle Capital Markets completed $43 billion in investment sale and debt and equity transactions globally. The firm’s dealmakers completed $33 billion in global investment sales and buy-side transactions, equating to nearly $140 million of investment trades completed every working day around the globe. In the United States, Jones Lang LaSalle grew its office broker volumes by 257 percent in 2010 and is quickly gaining market share across all property types. The firm’s Capital Markets team comprises approximately 800 specialists, operating in 185 major markets worldwide.

About Jones Lang LaSalle
Jones Lang LaSalle (NYSE:JLL) is a financial and professional services firm specializing in real estate. The firm offers integrated services delivered by expert teams worldwide to clients seeking increased value by owning, occupying or investing in real estate. With 2010 global revenue of more than $3.6 billion, Jones Lang LaSalle serves clients in 70 countries from more than 1,000 locations worldwide, including 185 corporate offices. The firm is an industry leader in property and corporate facility management services, with a portfolio of approximately 1.8 billion square feet worldwide. LaSalle Investment Management, the company’s investment management business, is one of the world’s largest and most diverse in real estate with more than $47.7 billion of assets under management. For further information, please visit our website, www.joneslanglasalle.com.