Investing in commercial real estate can be a lucrative opportunity for businesses and individuals alike. However, securing financing for these properties can be a complex process. In Oklahoma, there are a variety of financing options available for different types of commercial properties. Understanding the current state of the economy and real estate markets in the state can help investors make informed decisions about their financing options.

Economy in Review

Oklahoma's economy has been steadily growing in recent years, with a gross domestic product (GDP) of $181.9 billion in 2019, according to the Bureau of Economic Analysis. The state's unemployment rate was 5.3% in December 2020, slightly higher than the national average of 6.7%. However, the state has seen job growth in industries such as healthcare, education, and professional and business services.

Multifamily Market

The multifamily market in Oklahoma has remained stable, with a vacancy rate of 6.4% in the fourth quarter of 2020, according to CBRE. Financing options for multifamily properties include conventional loans, FHA loans, and Fannie Mae and Freddie Mac loans.

Office Market

The office market in Oklahoma has seen some challenges due to the COVID-19 pandemic, with a vacancy rate of 18.5% in the fourth quarter of 2020, according to CBRE. However, there are still opportunities for investors, particularly in suburban areas. Financing options for office properties include conventional loans, SBA loans, and CMBS loans.

Industrial Market

The industrial market in Oklahoma has remained strong, with a vacancy rate of 5.8% in the fourth quarter of 2020, according to CBRE. Financing options for industrial properties include conventional loans, SBA loans, and CMBS loans.

Retail Market

The retail market in Oklahoma has faced challenges in recent years, with a vacancy rate of 11.5% in the fourth quarter of 2020, according to CBRE. However, there are still opportunities for investors in certain areas and property types. Financing options for retail properties include conventional loans, SBA loans, and CMBS loans.

Self-Storage Market

The self-storage market in Oklahoma has remained strong, with a vacancy rate of 7.5% in the fourth quarter of 2020, according to CBRE. Financing options for self-storage properties include conventional loans, SBA loans, and CMBS loans.

Hospitality Market

The hospitality market in Oklahoma has faced significant challenges due to the COVID-19 pandemic, with a decline in occupancy rates and revenue per available room. However, there are still opportunities for investors in certain areas and property types. Financing options for hospitality properties include conventional loans, SBA loans, and CMBS loans.

Commercial Real Estate Loans by Purpose

There are many types of loans available for commercial properties, and the best fit for you depends on your investment strategy. Here are three broad categories of financing available.

Permanent Financing

Permanent financing is a type of loan that remains in place for an extended period of time. It's commonly used to finance the acquisition of commercial properties or to refinance existing debt. Types of permanent financing include bank loans, loans from government-sponsored entities like Fannie Mae and Freddie Mac, HUD loans, credit union loans, loans from life insurance companies, Commercial Mortgage Backed Securities (CMBS) loans, and other types of loans depending on the specifics of the commercial property.

Construction Financing

Construction financing, also known as interim financing, is used to finance the cost of construction for commercial properties. It is usually a short-term loan that covers the cost of land development and building construction. Once construction is completed, the borrower can typically convert this into a permanent loan or pay it off with a new loan.

Bridge Loans

Bridge loans are a type of short-term loan that can be used to cover costs in the interim period between the end of one loan and the beginning of another. They are typically used in commercial real estate to finance the transition between construction financing and permanent financing. Bridge loans generally have higher costs than most other financing options and are often interest-only and non-recourse.

Commercial Real Estate Loans by Type

Depending on the purpose of your loan, you will have several financing options available to meet your investment goals. Read below to learn more about specific loan types.

Bank Loans

Bank loans are a common financing option for commercial real estate. They can offer competitive interest rates and flexible terms, but the specifics can vary greatly from bank to bank. While they may not always be the best fit for larger, more complex projects, they can be an excellent option for smaller, simpler properties.

Life Company Loans

Life company loans are typically used to finance high-quality assets in major markets. They generally have lower loan-to-value ratios than most other loan types but offer competitive interest rates and long terms. However, they may not be suitable for riskier projects or properties in less established markets.

Agency Loans

Agency loans, offered by government-sponsored entities like Fannie Mae and Freddie Mac, are typically used for properties that are mostly multifamily. They offer attractive loan terms, low, fixed interest rates, and are non-recourse. However, there are restrictions on the amount of income that can come from other commercial uses.

HUD Loans

HUD multifamily loans are government-backed loans that are primarily used for the construction, substantial rehabilitation, purchase, and refinancing of multifamily properties. These loans offer long-term, non-recourse financing with competitive interest rates but have extensive requirements for qualification.

CMBS Loans

Commercial Mortgage Backed Securities (CMBS) loans are a type of mortgage-backed security backed by commercial real estate loans. Lenders focus more on the strength of the property than the borrower's credit, making them a good option for properties with strong cash flow.

SBA Loans

Small Business Administration (SBA) loans, such as the SBA 7(a) and SBA 504, offer attractive financing options for small businesses. However, the maximum amount for an SBA 7(a) loan is $5 million, while SBA 504 loans can go up to $20 million. They cannot be used for multifamily properties and are only available for properties that the business owner occupies.

Mezzanine Loans

Mezzanine financing is a hybrid form of financing that combines elements of debt financing and equity investment. It is typically used in commercial real estate to fill a funding gap between the primary loan and the total cost of a project.

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