Commercial real estate lenders and financial intermediaries are feeling increasingly confident about the state of their business these days, and for good reason. Financing activity rose dramatically in 2010 compared with 2009 levels, according to NREI's 20th Annual Top Lenders Survey.

A case in point is Wells Fargo, again the top lender. The San Francisco-based banking giant provided $36.9 billion in direct lending to the commercial real estate industry in 2010, up from $26.3 billion in 2009, marking a 40% increase.

In the financial intermediaries category, HFF retained its top spot. HFF arranged $11.9 billion in commercial real estate financing in 2010, nearly double the $6 billion volume in 2009.

“It's a reflection of us picking the right business, the right clients to work with, and being very disciplined about the business we brought in,” says John Pelusi, executive managing director of HFF. “I also think it's us picking up market share.”

Prudential Mortgage Capital Co. ranks as the No. 2 lender. In 2010, the Newark, N.J.-based company provided $8.8 billion in financing to the commercial real estate industry, up from $5.8 billion in 2009. That's a 52% increase.

Nearly one-quarter of Prudential's lending volume in 2010 stemmed from Federal Housing Administration (FHA) loans. Prudential Huntoon Paige, a unit of Prudential Mortgage Capital Co., secured more than $2 billion to finance affordable housing and market-rate multifamily housing, nursing homes, assisted living facilities and hospitals on behalf of FHA.

Shift in sentiment

Dave Twardock, president of Prudential Mortgage Capital, says the uptick in volume was to be expected after a moribund lending climate for most of 2009. By 2010, the cost of capital had come down. “You saw lower rates, lower spreads, and that led borrowers to feel like it was a more favorable market,” says Twardock.

One-third of Prudential's $8.8 billion lending volume in 2010 was tied to the multifamily sector via Fannie Mae, Freddie Mac, in addition to FHA. The balance of the volume was equally split between retail, office, and industrial.

“Home ownership rates are falling, which means that more people are renting,” say Twardock. “Rents are increasing. As a lender, it's great to be in a market where rents are going up.”

NorthMarq Capital, the eighth largest financial intermediary in this year's survey, arranged $4.7 billion in commercial real estate financing in 2010, up from $2.2 billion in 2009. That's a 114% increase.

As a direct lender, NorthMarq provided $2.1 billion in financing to the commercial real estate industry in 2010, exclusively through agency lending. That figure, too, was nearly double the $1.1 billion total in 2009 and places NorthMarq at No. 12 on this year's list of top lenders.

All totaled, about 75% of NorthMarq's activity in 2010 was linked to the multifamily sector. “Last year, we were just starting to do other property types,” says Edward Padilla, CEO of Minneapolis-based NorthMarq.

The majority of capital arranged by NorthMarq in 2010 was for refinancing rather than acquisitions, Padilla says, adding the commercial mortgage-backed securities market has quickly re-emerged as a capital source to his surprise

The property sales activity that came to a grinding halt in 2008 and 2009 is once again starting to percolate, albeit unevenly, adds Padilla. Trading activity in Washington, D.C., for example, is quite robust, fueling loan originations.

U.S. commercial property sales of at least $5 million totaled $124 billion in 2010, up from $54.6 billion in 2009, according to Real Capital Analytics. Dan Fasulo, managing director and head of research for Real Capital, says that he expects property sales to approach the $200 billion mark this year.