"It's only gotten worse," said Rick DeKam, broker at Midwest Realty Group in Portage. "Financing is still very difficult to find outside of the local community banks, who generally have lower lending limits. That said, there are still a few small pockets of funding, but terms are much more difficult which significantly impacts project economics. Therefore, most investors are currently waiting on the markets to adjust."That has stymied some West Michigan projects, developers say, and further threatens others.
"I think that the retail and hotel side are the most difficult to get lending for; medical and life sciences are strong," said Curt Peterson, group vice president at CSM Group, a construction management firm based in Kalamazoo, with an office in Grand Rapids. "The major challenge will be for municipal projects where the variable-rate bond funding is very high compared to the norm. I have heard rate changes of triple."
"Some sellers have asked us to re-underwrite properties we looked at six months ago. Since the underwriting requirements are tougher, their values have come down," he continued. "On the other hand, we're also seeing some people recognize tougher underwriting standards are here to stay. And for those that think they might be sellers within the next three years, they're thinking now is the time to get their property to the market before interest rates go up, since rising rates would have a very significant negative impact on valuation.