When It Comes To Lending, Multifamily And Industrial Projects Rule

When it comes to funding, developers are more likely to get a loan from a lender for an industrial or multifamily development than in other sectors, experts said.

Commerce coming from the ports of Los Angeles and the shortage of housing in and across the Los Angeles region are driving the demand for industrial and multifamily projects and lenders are competing to provide the funding, said several experts at Bisnow's LA Capital Markets and Foreign Investments event Wednesday at the JW Marriott in downtown Los Angeles. 

Even with rising interest rates, Mosaic Real Estate Investors’ Vicky Schiff said lenders are bullish on multifamily projects. 

“In the Southern California multifamily [market], lenders are very aggressive,” Schiff said. “Despite the Treasury hike over the past few months, rates are still at historically low levels and lenders continue to write aggressively.”

Pender Capital co-founder Zach Murphy said multifamily projects are not only doing well in Los Angeles and the Southern California market but in big cities across the nation. 

But the hottest industry in Southern California at the moment is industrial, Murphy said.

“We love industrial,” he said. “The market is more industrial here. It’s not going anywhere. As long as we have the largest combination of ports that is still going to be a strong asset class.”

While multifamily and industrial projects are seeing heavy lending activity, brick-and-mortar retail is down but could still be a viable investment. 

A recent Deloitte study found the retail market is expected to grow 3.2% to 3.8%. With unemployment low, disposable income rising and the strength of the housing market and stock market, consumers have more money to spend that retailers will compete to capture.

Many retail companies will serve an increasingly important dual in-store and online role, the Deloitte study said.

JPMorgan Chase Bank's Kenya Williams said while retail is not exactly the most favored product type right now, retail is still a big segment. 

“It’s still a good-performing asset,” Williams said. “If you've got a good grocery-anchored, strong sales per square foot [product] and in a strong location that’s still a pretty resilient product type.”

“We’re not huge fans of retail generally,” Murphy said. “But good retail can be great real estate.”