This article is very relevant for many of the commercial real estate loans we’ve been working on in both the market rate and affordable housing development markets. We’ve noticed that the material cost has been trending upwards for the last year but the increased labor costs have varied depending upon what market the project is located. This new pricing has created pressure on a few of our developers to either cut costs or increase the leverage to attain the same profit margin. While commercial real estate lending pricing for construction hasn’t increased much, higher loan to value loans have been hard to come by. That said, we’ve been able to accommodate many of our clients to help offset the additional costs.
-Adam Horowitz, Principal of Lever Capital Partners and President of the Real Estate Capital Alliance