Will There Be Less Financing Available for South Florida Land Development because of CMBS Spreads? Yes.


Commercial real estate in Florida (and elsewhwere) is dependent on the availability of financing. Developers and builders need third party lenders as a basic component of their business plan. Developers are rarely in a position to fund large scale projects for cash, and inviting equity partners often involves giving away too large a piece of the pie. Without third party financing, commercial real estate development will simply not return to Florida. It is key to our economic renewal. Unfortunately, current economic conditions are making some common financing structures riskier for lenders (and as a result less available for borrowers), and that means many large scale devleopments may not get built, further stalling Florida's recovery.

Why do large scale commercial deals matter to South Floridians?

Large scale real estate projects have always fueled growth in our economy, state wide. They create jobs, boost tax bases, and increase revenues in local communities through tourist spending, etc. When development comes to small municipalities, that means new infrastructure, new schools, more jobs, retail growth and tax revenues. Our cities need this now more than ever in recent history. One of the reasons that Florida has recently loosened its grip on developers is because increased real estate development is vital to revitalizing the state's economy. (For more on this, read our prior posts on the June 2011 deregulation legislation.)

However, there's still, unfortunately, very little certainty in Miami conference rooms or anywhere on Wall Street. Market fluctuations, banking failures and a general lack of confidence in our economic climate have created more than skepticism in the lending community, which means those who invest and provide needed financing for commercial real estate and land development are facing more risk (or at least they perceive more risk). This is true for both American investors and foreign lenders.

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