Michael Tanner from our Los Angeles office recently conducted a Q&A with the Crittenden Report about the state of the current industrial lending market and predictions. Continue reading below to find out more:

Crittenden Report: What are your predictions for industrial financing going forward?

MT: Demand has been strong and will remain so until we have more industrial supply and more opportunities. Industrial remains the darling of commercial financing and commands the best rates and terms.

How will underwriting change for industrial loans going forward?

MT: We have seen tighter debt yields for industrial space. Mostly, that has to do with the need for lenders to find a way to get more industrial space done, but it also is reliant on the incredible rent growth we have been seeing in most industrial markets.

What type of industrial properties will lenders target? (class, location, size, occupancy histories)?

MT: Pretty much anything but manufacturing. Warehousing, particularly large bulk space, has been the hottest commodity. Anything over 50,000 square feet gets very strong attention. Low and clear smaller buildings struggle.

What specific industrial tenants will lenders target? What tenants will they shy away from?

MT: They mostly shy away from environmentally challenging tenants and marijuana tenants. Otherwise, everyone is pretty much fair game.

What will be the typical leverage on these deals?

MT: 9% debt yields have been the norm.

What will be the typical interest rates? DSCR?

MT: Hard to say right now. We’re seeing rates anywhere from 4% or low 4% up to 4.5%. Figure general lending is around 4.5% today. Lenders would like a 1.50, but it can (and is) inside that quite often.

What will lenders look for from sponsors when underwriting? (certain net worth, liquidity, number of other properties, etc.)

MT: Net worth of 3x the loan amount.