New York is a bustling state with a diverse economy and a thriving real estate market. From the bustling streets of New York City to the rolling hills of upstate New York, there are plenty of opportunities for commercial property investors to find success. However, with so many different types of commercial properties available, it can be challenging to know where to start. In this article, we'll take a closer look at the economy and real estate markets in New York, and explore financing options for multifamily, office, industrial, retail, self-storage, and hospitality properties.

Economy in Review

New York is the fourth most populous state in the United States, with a population of over 19 million people. The state has a diverse economy, with major industries including finance, healthcare, education, and technology. According to the Bureau of Labor Statistics, the unemployment rate in New York was 8.2% as of December 2020, slightly higher than the national average of 6.7%. However, the state has seen steady job growth in recent years, with an increase of 1.3% in nonfarm employment from December 2019 to December 2020.

Multifamily Market

The multifamily market in New York is one of the most active in the country, with high demand for rental properties in both urban and suburban areas. According to the U.S. Census Bureau, the median rent for a two-bedroom apartment in New York was $1,545 as of 2019. Financing options for multifamily properties include traditional bank loans, government-backed loans such as FHA and Fannie Mae/Freddie Mac, and private lenders.

Office Market

The office market in New York is also strong, with a high demand for commercial office space in major cities like New York City and Albany. According to CBRE, the vacancy rate for office space in New York City was 10.9% as of Q4 2020, slightly higher than the national average of 10.2%. Financing options for office properties include traditional bank loans, SBA loans, and private lenders.

Industrial Market

The industrial market in New York is diverse, with a mix of manufacturing, warehousing, and distribution facilities. According to CBRE, the vacancy rate for industrial space in New York City was 5.3% as of Q4 2020, lower than the national average of 6.9%. Financing options for industrial properties include traditional bank loans, SBA loans, and private lenders.

Retail Market

The retail market in New York has faced some challenges in recent years, with the rise of e-commerce and the COVID-19 pandemic impacting brick-and-mortar stores. However, there are still opportunities for investors in certain areas, such as high-traffic shopping centers and mixed-use developments. Financing options for retail properties include traditional bank loans, SBA loans, and private lenders.

Self-Storage Market

The self-storage market in New York is growing, with a high demand for storage units in urban and suburban areas. According to CBRE, the vacancy rate for self-storage facilities in New York City was 5.8% as of Q4 2020, lower than the national average of 9.9%. Financing options for self-storage properties include traditional bank loans, SBA loans, and private lenders.

Hospitality Market

The hospitality market in New York has been hit hard by the COVID-19 pandemic, with travel restrictions and social distancing measures impacting hotels and other lodging facilities. However, there are still opportunities for investors in certain areas, such as vacation destinations and business travel hubs. Financing options for hospitality properties include traditional bank loans, SBA loans, and private lenders.

Commercial Real Estate Loans by Purpose

There are many types of loans available for commercial properties in New York, and the best fit for you depends on your investment strategy. Here are some broad categories of financing available.

Permanent Financing

Permanent financing is a type of loan that remains in place for an extended period of time. It's commonly used to finance the acquisition of commercial properties or to refinance existing debt. Types of permanent financing include bank loans, loans from government-sponsored entities like Fannie Mae and Freddie Mac, HUD loans, credit union loans, loans from life insurance companies, commercial mortgage backed securities (CMBS) loans, and other types of loans depending on the specifics of the commercial property.

Refinancing a Commercial Real Estate Property in New York

I wouldn't quite call this a separate type of loan, but I have to mention refinancing in here. These are typically permanent loans (but not always) used to pay down an existing, partially amortizing or interest-only loan.

Often you may be able to time a refinance to happen after an interest rate drop — an ideal solution — but if your loan is maturing during a period of higher rates, you shouldn't stress too much about this. We'll work with you to find the best loan terms for your commercial property by reaching out to potentially thousands of lenders. Just complete the form below, and we'll get to it.

Construction Financing

Construction financing, also known as interim financing, is used to finance the cost of construction for commercial properties. It is usually a short-term loan that covers the cost of land development and building construction. Once construction is completed, the borrower can typically convert this into a permanent loan or pay it off with a new loan.

Bridge Loans

Bridge loans are a type of short-term loan that can be used to cover costs in the interim period between the end of one loan and the beginning of another. They are typically used in commercial real estate to finance the transition between construction financing and permanent financing. Bridge loans generally have higher costs than most other financing options and are often interest-only and non-recourse.

Commercial Real Estate Loans by Type

Depending on the purpose of your loan, you will have several financing options available to meet your investment goals. Read below to learn more about specific loan types.

Bank Loans

Bank loans are a common financing option for commercial real estate in New York. They can offer competitive interest rates and flexible terms, but the specifics can vary greatly from bank to bank. While they may not always be the best fit for larger, more complex projects, they can be an excellent option for smaller, simpler properties.

Life Company Loans

Life company loans are typically used to finance high-quality assets in major markets. They generally have lower loan-to-value ratios than most other loan types but offer competitive interest rates and long terms. However, they may not be suitable for riskier projects or properties in less established markets.

Agency Loans

Agency loans, offered by government-sponsored entities like Fannie Mae and Freddie Mac, are typically used for properties that are mostly multifamily. They offer attractive loan terms, low, fixed interest rates, and are non-recourse. However, there are restrictions on the amount of income that can come from other commercial uses.

HUD Loans

HUD multifamily loans are government-backed loans that are primarily used for the construction, substantial rehabilitation, purchase, and refinancing of multifamily properties. These loans offer long-term, non-recourse financing with competitive interest rates but have extensive requirements for qualification.

CMBS Loans

Commercial Mortgage Backed Securities (CMBS) loans are a type of mortgage-backed security backed by commercial real estate loans. Lenders focus more on the strength of the property than the borrower's credit, making them a good option for properties with strong cash flow.

SBA Loans

Small Business Administration (SBA) loans, such as the SBA 7(a) and SBA 504, offer attractive financing options for small businesses. However, the maximum amount for an SBA 7(a) loan is $5 million, while SBA 504 loans can go up to $20 million. They cannot be used for multifamily properties and are only available for properties that the business owner occupies.

Mezzanine Loans

Mezzanine financing is a hybrid form of financing that combines elements of debt financing and equity investment. It is typically used in commercial real estate to fill a funding gap between the primary loan and the total cost of a project.

Commercial Property Insurance in New York

This part isn't about loans, but it's just as important to your investment's success. Let's talk (quickly) about insurance.

Insurance premiums have skyrocketed in the past few years, as I'm sure you know. While multifamily gets a lot of the attention, rates for insuring anything from office buildings to shopping centers have jumped significantly.

Janover Insurance Group is dedicated to finding the best insurance solutions for your commercial real estate assets in New York. Click to get a free insurance quote for your property — no obligation.

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