Banks trying to reenter the commercial real estate lending game have found themselves in a Catch-22.
Regulatory scrutiny and balance sheet issues effectively barred financial institutions from the market starting in 2023. Instead of disappearing completely, they lowered their exposure by lending to their new counterparts.
“We’ve backlevered ourselves essentially by financing some debt funds and causing that margin compression,” KeyBank Real Estate Capital Regional Executive Alan Isenstadt said at Bisnow’s New York Investment and Lending Conference.
But even as banks’ appetite for CRE lending has returned, debt funds are grabbing more and more market share.
“We’re competing against ourselves on two sides,” Isenstadt said.​