Los Angeles

Construction lenders have a healthy appetite for apartment deals. Despite the strong construction activity across the country, construction lenders feel comfortable lending on apartment deals, even with the threat of a recession coming in 2020. In fact, construction lenders are also showing a general openness to alternative multifamily products.

"We are generally seeing good appetite for multifamily, and this seems to be a good time for construction lenders to feel reasonably safe," Scott Choppin, founder of the Urban Pacific Group of Cos., tells GlobeSt.com. "We are all speculating when a downturn is coming, and lenders are vacillating between feeling safe and anticipating a recession. But, today, they are producing good loan volumes."

In response to the affordability crisis, developers are also emerging with new multifamily concepts. The Urban Pacific Group of Cos. has its urban townhouse model, which targets multi-generational households with five-bedroom units, and the co-living model, which is a curated and managed roommate-style of living. Construction lenders are showing interest in these property-types as well. "There is an openness from construction lenders to consider alternative products, not only mainstream products," says Choppin. "Where I see the friction is in that this is a new model, so how could lenders know the future of it? Is there a way to capture empirical data for a lender? Could you bet on growth long-term? That makes some properties are harder to underwrite."