The following excellent article was recently published on LinkedIn by Michael Comparato, President and Head of Commercial Real Estate at BSP/Franklin Templeton (NYSE: FBRT):
Of the $6 trillion of outstanding commercial real estate (CRE) debt, approximately $3 trillion is held within our banking system. Of that $3 trillion, approximately 70% is with regional and community banks.
There’s a reason why regional and community banks have all but stopped lending for the past 18 months. It's not because things are good. We are in the early days of a meaningful regional and community bank crisis, period, hard stop.
And while the banking system represents approximately 50% of the overall CRE credit market, banks historically have represented a meaningfully higher percentage (70%?) of construction lending for multifamily assets.
Are we dealing with an oversupply of multifamily in certain markets? Yes. But its a short-term oversupply. Reminder, the US has had a chronic housing shortage for decades…and after “all” this supply comes online, guess what? We’ll still have a multi-million unit housing shortage.
With banks on the sidelines, and staying there for the foreseeable future, supply is falling off a cliff. Multifamily starts are half of what they were a year ago. They are only headed in one direction…down.
2026, 2027, 2028 will go back to strong multifamily rent growth years because of the lack of supply.
