The $6 trillion commercial real estate (CRE) lending market1 has seen banks steadily cede market share over time, though they still represent roughly half the market. Even small shifts in market share are significant, with every 1% change equating to $60 billion—making it critical, in our view, for investors to understand and anticipate these trends. While commercial mortgage-backed securities (CMBS) have also contributed to share losses, the primary beneficiaries have been non-banks, life insurance companies and government-sponsored entities (GSEs), particularly in the multifamily sector. Life insurers have maintained consistent participation, while non-banks have expanded their footprint, especially in floating rate loans.
We believe that the ongoing structural changes and the resulting shifts in market share among providers of capital will continue to create a fluid opportunity set across various segments of the real estate credit market. In our view, managers with an opportunistic bent are well suited for the current dynamic market environment and can operate with agility in areas where traditional financial sources of capital are less adaptable, either due to complexity, speed or limitations in structuring flexibility.
In this report, we explain the dynamics of the CRE market and discuss what we consider differentiated opportunities within real estate credit.
