Q&A with Lauren O'Neil: What you need to know about commercial real estate financing

Senior Managing Director Lauren O’Neil, who is co-head of JLL's Boston Capital Markets office, discusses the current state of commercial real estate financing and outside factors that may or may not be affecting lending. 

Ms. O'Neil has more than 15 years of experience and, in addition to overseeing the day-to-day operations of the Boston office, she is primarily responsible for originating debt and equity transactions throughout the eastern United States. During her career, she has been involved in more than $9 billion in debt placement, investment advisory and equity placement transactions. 

• Now we are into third quarter of the year, what do you think investors should pay attention to for the rest of 2019?
  In general, things in the commercial real estate market remain strong.  Fundamentals are intact, for the most part the supply/demand dynamics are in balance, we aren’t seeing companies take space unnecessarily, nor are we seeing lenders be too aggressive.  There is really nothing to suggest the current cycle won’t continue for the foreseeable future when you look domestically.  I think the biggest thing for investors to pay attention to are the global headwinds.  Continued tension abroad, trade wars and lack of confidence in the U.S. Treasury could have bigger impacts on the domestic real estate market.  There are also concerns we could go back into a period of paralysis once we get closer to election season, which could lead to less liquidity in 2020.     
    
• How has the recent drop in Treasuries impacted commercial real estate lending? 
  Lending continues to be strong. There is still a lot of capital chasing way too few deals, and there are still very attractive financing terms available for most product types. The recent drop in Treasuries has led to an uptick in borrowing requests, in order to take advantage of the low cost of capital.  Many balance sheet lenders have instituted floors, ranging from 3 to 3.5% on 10-year financing, depending on their remaining allocations for 2019.  Most do not want to go below 3%, so there is not a benefit for going shorter right now.  The banks are in a good position due to their historically low spreads, married with the low swap rates, producing interest rates below 3% for 10-year financings.  One of the bigger impacts to lending recently has been the pull back from the agencies, which has put some stress on the system and has made borrowing for multi-housing assets a bit more challenging.
  
  
• How is the deregulation of the banking industry affecting how lenders are underwriting real estate?
  Bank lenders have certainly become more aggressive in their lending, offering more non-recourse loans, tighter pricing and/or higher leverage. Whether it was deregulation or needing to compete in the new world of debt funds and other forms of creative debt capital, it’s hard to say which was a bigger factor, but it certainly has impacted things over the past couple of years.
  
  
• How important do you feel it is to mentor other women and what can be done to increase the number of female brokers in the industry?
  I think any employee, male or female, that, in order to be successful, it is important to have a strong mentor who is going to help support your career development. I think men can be equally as important mentors for women as women can be, as it is more important to find someone from whom you can learn who will help support you and look to help you succeed. If you don’t have that support, the odds are you are just going to do the job, and, in order to remain in this industry, you need to be fulfilled by it – not just an employee going through the motions. More so, I think women need to feel supported by both their female and male counterparts. They need to be given an equal seat at the table, equal compensation and an equal voice. Those are the things that I think other women can do for each other – fight for those seats at the table and equality at all levels. Prove to people that, because you are a mom or caring for sick parents or whatever your life may require, that you are doing as much, if not more, in your day job, are an important player on the team and that you are an equal. Women often have to overcompensate from a time perspective and work more efficiently to get the job done and balance everything, but, at the end of the day, they are doing the job as well as men (if not better), and that needs to be recognized. They bring an important perspective to any situation that I think brings balance to an organization and is one we need to champion.