WASHINGTON (MNI) – The following is the text of the National
Association of Realtors’ summary of its annual Commercial Real Estate
Lending Survey, published Thursday:

Although commercial real estate markets showed signs of recovery in
2011, commercial lending standards have tightened in the past year for
small businesses and scuttled a major portion of contracted transactions
for smaller properties, according to the National Association of
Realtors annual Commercial Real Estate 2012 Lending Survey.

Lawrence Yun, NAR chief economist, said there is a significant
split in commercial lending depending on value. “This is very much a
tale of two markets. There have been notable improvements in capital
for large commercial transactions valued at $2.5 million or higher, but
there remain significant challenges for small business,” he said.

“Our Realtor members typically are involved in helping commercial
clients with purchases under $2 million, where a lack of capital has
caused two out of three respondents to report deals have fallen through.
Given that most jobs are created through small business, the lack of
capital is hurting small businesses and the overall economic recovery.”

According to Real Capital Analytics, more than 13,000 major
properties valued at $2.5 million or higher traded hands in 2011. Sales
volume increased 51 percent over 2010 to $205.8 billion, with the lion’s
share of lending funds coming from big banks. Other funding sources
include insurance companies and institutional investors.

By contrast, the NAR survey shows that small business transactions
rely heavily on smaller regional and local banks, and small private
investors, for lending capital.

Respondents indicate nearly 30 percent of smaller commercial
properties are purchased with cash, reflecting the tight credit
environment, and some are seller financed. “When credit is tight, cash
is king,” Yun added.

The most common types of property transactions referenced in the
survey were multifamily, land, warehouse, suburban office and retail
strip centers. Other property types include industrial flex space,
central business district office, freestanding retail, and restaurants.

Realtors report the system is clogged with property that must be
sold or refinanced, which is significantly impacting the recovery.
Long-time investors who never had a problem getting a loan in the past
are now being declined.

More than half of respondents say lending is just as stringent as a
year ago, while 23 percent say it is more stringent; 20 percent say it
is less stringent but not near historical averages. Members also
complained about banks being over-regulated, and refinancing being
denied due to stringent internal lender underwriting requirements or low
appraisal valuations.

Thirty-six percent of Realtors said clients used the Small
Business Administration commercial refinance program, but of those who
didn’t, 45 percent said it was due to burdensome application and
reporting requirements.

The Commercial Real Estate 2012 Lending Survey is published by the
NAR Research Division for the commercial community. In April 2012, a
random sample of 32,459 Realtors with an interest in commercial real
estate was invited to complete an online survey. A total of 474
responses were received, for an overall response rate of 1.46 percent.

** MNI Washington Bureau: 202-371-2121 **

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