Covid-19 Lending Update: What’s Hot and What’s Not

The global Coronavirus pandemic has wreaked havoc on the nation’s economy and has severely impacted the commercial real estate market.  After more than six months, some states are trying to get back to normal, while others are experiencing a second wave of school and business closures.  Many commercial property owners have experienced serious hardship, and a devaluation of their properties, as a result of poor collections, due to tenants who are unable to pay their rent.  As a result, most commercial real estate lenders have either stopped lending or have tightened up their underwriting guidelines.  Here is a current lending update on various property types:

Apartment buildings – Multifamily loans

Most apartment lenders are still lending as people still need a place to live.  However, due to rent strikes, moratoriums on evictions, and tenants who can not afford to pay rent, lenders are lending conservatively.  Underwriters are lowering their loan to value ratios, increasing their debt service requirements, and collecting reserve accounts in order to protect against cashflow shortfalls.  Certain apartment sectors have been extremely hard hit, including the luxury market and student housing.  In the luxury market, many higher end rentals have suffered large rental declines as tenants are concerned about high rental costs.  In the student housing market, we are seeing extremely high vacancy rates as students are staying home for virtual classes and do not need to be on-campus while their schools are closed.


Even before Covid-19, the retail sector was in trouble due to the internet and online shopping.  Many large retailers declared bankruptcy as they could not compete against the likes of Amazon and other internet retailers.  The pandemic has made retail lending almost untouchable.  With abundant store closures due to the Coronavirus, people are not visiting local retailers to go shopping.  Stores that provide essential services, such as grocery stores and pharmacies are still financeable, as are some of the single tenant properties like Family Dollar and Dollar General.  Lenders who are still looking at retail deals are generally focused on these essential service businesses.  On the other hand, businesses like restaurants, clubs, and bars are finding it almost impossible to secure financing.

Hotels and Motels

This sector has been decimated by the pandemic.  Business and leisure travel are both at all-time lows and most hotels and motels are suffering huge declines in income.  Very few lenders are looking to make hospitality loans in this market.


Many employees are working from home and will probably continue for some time to come.  Companies are considering allowing “work from home” even after the pandemic.  This is causing many companies to reevaluate their need for office space, making lenders very concerned about lending in this sector.  Expect to see much more conservative lending for the foreseeable future.  One exception is medical office space.  Medical space is an essential service and the only growing market in this sector.


Lenders still have an appetite in this sector.  Lenders are considering loans for owner/user industrial companies that are able to grow and survive in this economic downturn, especially those companies active in essential services and production of essential supplies.  Also very active is the market for warehouse space for internet retailers who need warehouse and distribution centers for storage and distribution, such as Federal Express and Amazon.

Commercial mortgage lending is going through many changes right now.  It is important to get local, knowledgeable advice from a qualified commercial lender before proceeding.  Please feel free to visit for more information.