Real Estate Investment Market Report for Virginia, Pennsylvania, and Washington D.C.: May 2021
How do commercial construction loans work?
A construction loan is a type of short-term financing to fund a new construction project. If you’re planning to construct a multi-family home, apartment building, high-rise, commercial office building, or another type of large project, you will probably consider obtaining a commercial construction loan.
Commercial construction loans are different from other loans. Most loans are structured so the borrower receives the full amount they are requesting upfront. Then, once the loan is received, the borrower makes payments over a set period of time. However, with construction loans, the borrower does not receive the full amount upfront.
Understand the construction loan processMarket Activity
Richmond’s multifamily market led the nation in rent growth through the beginning of the pandemic and continues to show resilience despite some headwinds. With a full pipeline of supply in all submarkets stabilizing unemployment rates and population growth, the market is well-positioned for the rest of 2021. There are currently 5,665 units under construction (5.77 percent of the current inventory).
Market Activity
Multifamily permits are outpacing forecasts and hitting their highest numbers since 2016. Though the high amount of inventory on its way may seem to be a red flag, rental vacancies are in high demand. In addition, not only are vacancies down over the year, but they are below averages seen in the last five years. Lastly, Philadelphia’s housing supply sits around 2.6 months, well above the national average of 1.6 months.
Market Activity
The Washington D.C. office market continues to face influxes of newly renovated space, however, the market is closing in at the end of its current development cycle with a small pipeline post-2021. The increase in supply combined with the lack of new demand has led to higher vacancy rates. Vacancy rates are expected to increase throughout 2021 as companies continue to downsize and new developments come to the market.
