See below for Andy Little's recent commentary in the Richmond Times-Dispatch.

It is unlikely that Bruce Springsteen is referring to the lowest commercial mortgage rates in history in his “Glory Days” song about past successes, but it is hard to imagine rates will ever be as low for borrowers as they were in halcyon days of 2020.

With a huge wave of additional stimulus expected out of Congress in the coming months, many are now worried about inflation that is pushing U.S. Treasury yields higher and commercial mortgage rates with them.

There is no reason to panic since rates are in the 3.25% to 3.75% range for most conservatively leveraged properties, but that is a 0.5 percentage point increase from the end of 2020.

Each February typically marks the annual trek to San Diego for mortgage bankers to meet with numerous lenders and get a pulse of the debt market. Discussions with various lenders did take place across the country last month, but over Zoom.

Despite the subdued atmosphere, it was hard not to detect lender enthusiasm for 2021. Insurance company lenders, who were generally stalled out in the middle months of last year, are now back in force and along with conduit and agency lenders all should combine to keep mortgage rates low in the coming year. 

Expectations are high for 2021, and lenders are in the mood to get money out the door.

As one lender put it, “we are in a ‘risk on’ posture.” That “risk on” posture can be seen in almost all asset classes. Not only is the stock market on the rise, bond yields on so-called junk bonds or non-investment grade bonds fell below 4% for the first time ever, according to the Bloomberg Barclays US Corporate High-Yield index, which dipped to 3.96% in early February. Even oil and bitcoin are surging.

Cheap money and more stimulus have many in commercial real estate believing that 2021 will be a boom year, especially when compared to 2020.

According to Real Capital Analytics, a New York-based real estate research firm, sales volume in every one of the top 25 cities was down in 2020 when compared to 2019. While cities like New York, Los Angeles and Seattle saw huge drops in sales volume, the Raleigh-Durham, N.C., area showed surprising resilience and was the only city in the top 25 with a single-digit drop, which amounted to a decline of only 1%.

While the Richmond region does not appear in the top 25 markets, data from other sources shows the investment sales volume dipped approximately 20%, which is stronger than the overall drop of 32% in all U.S. markets.

This relative strength can be highly attributed to a robust industrial and apartment sales market in the Richmond area, which accounted for over 75% of all 2020 sales.

Both property types are expected to have continued strength in 2021 and are attracting national attention.

The multifamily sector in the Richmond region is flourishing with the number of new units exceeding 3,000 by the end of last year, according to Michael Cobb, a senior market analyst at commercial real estate analytics and research firm CoStar Group. He told those virtually attending the Greater Richmond Association for Commercial Real Estate’s annual Commercial Real Estate Market Review last week that the number of apartment units tripled the region’s long-term annual historical average.

Despite the recent rise in the benchmark 10-year U.S. Treasury, the average cap rates in Richmond for the last few apartment deals to trade hands is well below 5% and heading to 4.5%. While that is low by historic standards, it is a wider spread over the benchmark U.S. Treasury than in prior years.

Perhaps the glory days for apartment owners in Richmond are still yet to come.

John B. Levy & Co. partner and investment banker Andrew Little can be reached at alittle@ or 804-500-9030.