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Posted Jul 27, 2020

Research results: Fundraising continues as inventory and credit conditions tighten

Fundraising continues as inventory and credit conditions tighten

Where is the commercial real estate market headed? To better understand sponsor sentiment, Juniper Square conducted a survey from July 13-17. Respondents reported that acquisition opportunities are scarcer and credit conditions are tightening, but many are still successfully fundraising.

114 commercial real estate professionals participated in the anonymized survey. Nearly half were principals and CEOs, and the participants represented a cross-section of regional and nationwide sponsors with a mix of property types. Here are a few things we learned:

The majority of sponsors say less banks are lending now on core assets post-COVID. Further, three quarters of respondents say collateral requirements for credit have increased “somewhat” or “significantly.” At the same time, most also say lower interest rates are available now.

Compared to this time last year, most sponsors are seeing fewer acquisition opportunities. The combination of more capital moving into commercial real estate, and cheap credit for those who can secure it, means the inventory of available, attractive assets is limited.

Most sponsors have been fundraising: 70% of Juniper Square sponsors and 52% of typical sponsors in the industry have been in-market at some point in the last four months.

Many have closed new capital commitments since March. Overall, nearly half (49%) have already closed capital commitments from existing investors and close to half (45%) have closed commitments from new investors. Juniper Square customer survey respondents are outperforming the market in this area:

  • 60% of Juniper Square sponsors respondents have closed new capital commitments from existing investors, compared with 29% of typical sponsors.
  • 53% of Juniper Square sponsor respondents have closed capital commitments from new investors, compared with 30% of typical sponsors.

Three quarters of survey respondents report that new capital commitments are the same size or larger on average compared to before the crisis.

Respondent concerns about the recession have risen. Those who said they are “very concerned” increased from 26% in June to 34% in July. A majority (51%) now expect the impact of this recession on commercial real estate to be equal or greater to that of the Great Financial Crisis of 2007-2009.

To see the latest sponsor sentiment, data on collections, details by property type, and more, download the survey summary here.