Tech can be a major boon in bringing agility to an evolving market. Unfortunately, not every market is taking full advantage of current technology. Modernizing banking is the only way banks can survive in the shiting market of today. Commercial real estate lending, for example, hasn’t changed in decades. On average, it takes 3 months to close a commercial real estate loan. Once a borrower finds an investment property and identifies their loan needs, their broker has to call individual banks to source a loan. Due diligence on the lender’s part can take months. After that much time in negotiation, it’s rare for either side to get exactly the deal they wanted. Additionally, 2020 proved that many things can change in a 3-month span.

COVID-19’s Effect on Real Estate Lending

The COVID-19 pandemic transformed the commercial real estate landscape. At the lowest point in the pandemic, retail vacancy stood at 20%, with office vacancy not far behind at 17%. Even today, a third of Americans work from home full time. Office spaces are in the process of reimagining how their buildings are used in a hybrid workforce. Nearly 6 in 10 retailers are concerned with rising rent costs as their stores turn into mini-warehouses for curbside and delivery services.

Yet while certain commercial real estate properties struggle, others are flourishing. The shift to remote work will increase demand for cloud and networking services, giving data centres their time to shine. Meanwhile, e-commerce continues to drive demand for distribution sites, logistics warehouses, and storage spaces. Lenders are still wanting deals that offer strong, long term value. How lenders define a quality property investment will just look very different in 2021 and beyond. Banks could be doing so much more to address this transformation if they updated their technology.

Compare the current state of commercial lending to their residential counterparts. Despite everything 2020 threw at residential mortgage lenders, they barely missed a beat thanks to their cunning use of technology. 92% of residential borrowers began their research on lenders online. A whopping 43% completed their entire application online, a figure likely to increase in the future.

Why Modernizing Banking is Necessary for Their Survival

Modernizing banking is imperative; alternative lending platforms have the power to ice them out entirely. Already, tech-savvy newcomers like CrowdStreet and FundRise have over $1 billion invested each. Banks can avoid being left behind, but they need to work to assert their place. As the Forbes Real Estate Council warned, “reluctance to adopt new technology can stand in the way of innovation, and this, in turn, can lead to unintentional and potentially hazardous forms of disruption.”

Advanced technologies can give banks the agility they need in commercial markets. With their system, lenders and brokers upload their criteria separately. Once their profile is complete, advanced algorithms match the two sides to deals of best fit. All the information that both needs is kept in one convenient place and deals are already matched to bank requirements. This sorting process speeds up the bidding and negotiation phases immensely. Everyone benefits from the time and effort they save thanks to increased deal speed and safety.