Commercial Real Estate Insights
With Popular Bank Head of Commercial Banking Ken Mitchell
Popular Bank Senior Vice President and Head of Commercial Banking Ken Mitchell joined fellow industry leaders to discuss commercial real estate insights during the virtual Mortgage Bankers Association of New York (MBA of NY) Lender Roundtable on May 11, 2021. Panelists discussed the current state of property deal-making, industry risk, COVID-19 shutdown, and a forecast for 2021.
See below for key commercial real estate insights from the Lender Roundtable.
1. Shifting Portfolio Management and Underwriting Best Practices.
Commercial underwriting best practices have shifted amid the COVID-19 health crisis. In the face of unprecedented disruption, lenders worked quickly to reevaluate both new business and current portfolio management. This included taking a more structured and risk-adverse approach to more vulnerable assets, closely evaluating borrower profiles, debt service reserves, loan-to-value ratios and market projections for the next 12-18 months.
In addition to more rigorous commercial underwriting practices, strategic partnerships became key as lenders worked to holistically meet customer needs. Mitchell shared that during this time, Popular Bank strategically leaned into high-touch relationships to better support existing relationships, while also better gauging the integrity of the commercial lending portfolio.
2. Identifying Commercial Real Estate Lending Bright Spots.
Commercial real estate is at a crossroads, and the greater New York area has been among those most impacted. During this time, concerns continue to mount among retail and hospitality asset classes amid health and safety protocols, curbed consumer behaviors and travel restrictions.
Despite these realities, industry leaders remain optimistic, leaning into market conditions, signaling agility and resiliency across CRE asset classes. Lending enthusiasm returned to pre-pandemic activity in the first half of 2021. This behavior was driven by regulatory capital regimes, favorable pricing and high competition for product. Notably, increased lender appetite signals a highly anticipated market rebound, as lenders seek to both maintain their current book of business and pursue new inventory.
In addition to industry optimism, experts have additionally identified CRE areas of strength amid the pandemic economy. This includes multifamily, self-storage, industrial, life science and healthcare financing.
3. Anticipated back-to-work economy to drive optimism.
Commercial office spaces pose some of the largest concerns for CRE lending within the greater New York area. According to a recent Colliers International report, Manhattan office space availability reached 16.1% in Q1 2021, the highest percentage ever on record. While growing comfort with technology and a cautiously optimistic pandemic response suggest a new normal for business operations, industry experts believe that New York City can anticipate a quick pivot for commercial real estate, with increased leasing momentum across class A assets. While the return-to-work economy will signal confidence for future lending, it also suggests a new normal for CRE teams. Industry experts agree that the new hybrid work models will drive greater collaboration and solutions to meet changing customer needs.
Ken Mitchell is a Senior Vice President and Head of Commercial Banking for Popular Bank. As a member of the Senior Management Team, he plays an instrumental role in growing Popular Bank’s vision to meet the growing and diverse financial needs of its customers and communities. Mitchell oversees all Middle Market, Healthcare, and Commercial Real Estate Lending across the organization. He leads his team in providing strategic lending and financing solutions.