DXD Capital, a self-storage developer and investor, has released its lender-survey report, which offers a snapshot of lending sentiment within the self-storage sector. It bases findings on insight from banks and credit unions actively engaged in commercial real estate (CRE) finance. Participants provided their outlook on lending strategies, portfolio concentration, underwriting criteria and perceived risks within the current macroeconomic environment, according to a press release.
Report observations include:
Nearly half (47.1%) of respondents reported that self-storage loan performance was on par with other CRE sectors, while 23.5% noted under performance and 23.5% indicated a lack of sufficient data to evaluate.
When ranking underwriting concerns, absorption risk during lease-up was the top issue (88.2%), followed by oversupply, sponsor capabilities and construction costs.
Most lenders (70.8%) have not restructured or extended any self-storage loans in the past 12 months, indicating that overall loan performance has remained stable despite broader market pressures.
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In terms of broader macroeconomic and regulatory pressures, lenders expressed the greatest concern over interest rates, CRE market softening and recession risk, with regional bank pullback also registering as a key issue.
“As a consequence of the generous lending practices that occurred in 2021 and 2022, coupled with significant interest-rate hikes leading to asset distress, banks have adopted a conservative lending approach today,” the report stated. “This posture is expected to keep construction lending subdued for the next one to two years, thereby mitigating the risk of oversupply across numerous commercial real estate asset classes, particularly self-storage.”
Based in Denver, DXD is a real estate and private-equity firm that leverages data technology to make opportunistic investments. It focuses exclusively on the self-storage sector.
ISS Staff
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