MSA: Metropolitan Statistical Area in Commercial Real Estate

What is the Importance of MSAs in Commercial Real Estate?

Metropolitan Statistical Areas, or MSAs, are U.S. government designations for specific urban areas. MSAs are defined by the U.S. Office of Management and Budget (OMB). Currently, there are 383 Metropolitan Statistical Areas in the United States and 7 in Puerto Rico. An MSA generally groups several cities and counties that are closely interconnected, which makes it significantly easier for government agencies and businesses to compile statistics about a specific area. Most MSAs are based around one large city, such as Miami, New York City, or Boston, and incorporate nearby cities and counties into one, combined MSA. In order to qualify as an MSA, an area must have one city with a population of at least 50,000 people.

How MSAs Impact Commercial Financing

In general, it’s substantially easier for commercial real estate borrowers to obtain financing if their property is located in the core of a major MSA. In addition, borrowers attempting to secure financing for properties located in major Metropolitan Statistical Areas are generally offered better loan terms, including higher LTVs, lower DSCRs, and better pricing. Lenders may also be willing to budge on borrower net worth and liquidity requirements. This is because properties located in dense urban areas are much less of a risk for lenders, as they are more likely to remain occupied-- meaning borrowers are much less likely to default. And, if a borrower does default, selling a property in a major market is generally a faster process than selling a property in a smaller one.

If a property is not located in an MSA at all, (i.e. rural warehouses or apartments) it becomes much more difficult to get commercial financing, as the risk for lenders greatly increases. However, to address this issue, the United States Department of Agriculture (USDA) guarantees both multifamily loans and business financing for multifamily properties/business in rural areas. In particular, USDA 538 multifamily loans offer extremely favorable terms for borrowers, including LTVs up to 90%, but resident income restrictions do apply.


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