The nation’s credit crunch is hardly affecting the Washington area’s commercial real estate industry, according to local industry experts, although lenders and developers might be pickier about projects in 2008.
“Lending in this area has continued to be very competitive,” Barbara Gertzog, senior vice president of SunTrust Bank, said at a recent panel discussion hosted by Women in Commercial Real Estate. “I think we’re looking a little more carefully at hotels, but we’re still looking heavily at D.C. for the bread and butter projects like offices and apartments.”
Small and midrange banks that are wary of the unstable residential market are delving further into commercial real estate loans. Banks of all sizes see the Washington area’s low office vacancy rates and high employment levels as indicators that commercial real estate loans are a safe bet, panelists said.
“For good markets like Washington, D.C., we don’t believe the capital is going to go down at all,” said John Duffy, senior managing director at the national commercial real estate mortgage firm HFF. “But we do believe that people will be much more conservative all the way through 2008. A big asset with a lot of vacancy — in the old days, you could sell it quickly. The big deals are harder to finance now.”
Lenders will be more selective, focusing on developers with the best track records and strongest finances, Duffy predicted. Developers are already having trouble drawing capital to the Dulles corridor, where overdevelopment has led to vacant office buildings, he noted.
“There is a difference,” said Jeffrey Neal, principal with Monument Realty, which is developing several projects near the new Washington Nationals baseball stadium. “The real estate fundamentals are still strong, but some of [the lenders] are still sitting back and waiting to make sure there isn’t a crisis coming.”
Monument is going to play it safe as well.
“I don’t think weplan to put a shovel in the ground anywhere we don’t already have a shovel in the ground next year,” Neal said. “We won’t be at the money store in 2008.”
