The favorable economic policy and decreasing inflation rate have been driving the annual growth rate (CAGR) of the commercial real estate and hospitality industry in the United States of America. The surge in CRE and hotel transactions has been supporting economic growth as well as job creation across the country.
A significant percentage of these transactions are facilitated by brokers. They drive the acquisition, sale, and financing of hotel properties by acting as intermediaries and by easing up any friction in the transaction. In addition to connecting buyers, sellers, and hospitality lenders, they share market intelligence, negotiation expertise, and valuation insights crucial for closing deals.
In this blog post, we explore why the expertise of CRE and hotel brokers is crucial for borrowers and lenders.
The Value of Brokers for Borrowers
Opportunity Discovery: New CRE and hospitality entrepreneurs often lack the opportunity and network essential to access off-market deals. CRE and Hotel brokers leverage their extensive network to help them access investment opportunities not available in the public domain.
Market Insights: Dynamics in the CRE sector change frequently. These changes make it challenging for the entrepreneurs to make informed decisions. Brokers help them choose the best investment opportunity and increase returns by sharing in-depth market insights.
Negotiation Expertise: CRE brokers impact the terms of the CRE transactions using their negotiation skills. They negotiate with the seller on behalf of the borrower. Hence, it becomes easier for CRE and hospitality entrepreneurs to acquire the properties at competitive prices, favorable financing conditions, and flexible contract terms.
Financing Assistance: Experienced CRE and hospitality lenders allow borrowers to choose from several credit products according to their financial needs and goals. However, borrowers must negotiate with lenders to secure credit on favorable terms. Brokers help them secure tailored CRE and hospitality loans by connecting them with the right lenders and navigating available credit options.
The Value of CRE and Hotel Brokers for Lenders
Pre-Qualifying Buyers: Brokers accelerate CRE transactions by connecting lenders with financially stable borrowers. Before connecting a borrower to the lender, they act as the first checkpoint to evaluate the borrower’s financial background, business plan, and industry expertise. The pre-qualification helps lenders offer loans by mitigating lending risks.
Market Valuation: CRE lenders determine the loan amount based on the appraised value of the property based on thorough due diligence. They ensure accurate market valuation of the collateral when calculating loan-to-value (LTV) ratios. Brokers facilitate in getting the right information to establish hotel property's market value.
Streamlining Transactions: CRE brokers accelerate loan approval and closure by facilitating smooth communication between the lender and borrower. They help the lender structure loan agreements after negotiating with the borrower. At the same time, they assist the borrower in navigating documentation, collateral conditions, and compliance requirements.
The Impact of CRE Brokers on the Industry
CRE brokers play a significant role in the American CRE and hospitality industry. In addition to facilitating transactions, they contribute immensely towards boosting investment activities and ensuring asset stability. We can understand their impact on the industry based on the following statistics.
According to Hotel Investment Today, “Hotel brokerage transactions totaled just over $14.3 billion in 2024 and included approximately 58,900 hotel rooms with an average deal size of $40.2 million and an average sale price per room of $243,000.”
According to Hotel News Resource, “U.S. hotel brokers anticipate a gradual, consistent increase in transactions over the next few years, particularly in the $10 million to $20 million segment.”
The gradual and consistent increase in transactions will make CRE brokers play a more important role in the CRE and hospitality industry.
Why Do CRE Transactions Need a Broker?
When engaging in transactions, many borrowers and lenders may look to save broker fees by going solo. However, going solo often makes it challenging for borrowers to find lucrative deals, reduce interest rates, meet compliance requirements, gain market insights, and manage transactions.
At the same time, experienced CRE brokers help lenders access qualified lenders, determine property value, structure deals, and minimize lending risks. Hence, lenders streamline and accelerate complex commercial real estate transactions by working with reputable brokers.
In addition to mitigating the risk of going solo, seasoned brokers expedite commercial real estate transactions. Thus, they make deals successful by aligning the interests of buyers, sellers, and lenders throughout the process.
Conclusion
CRE and hotel breakers play an important role in streamlining and accelerating CRE transactions by acting as intermediaries. Their experience, expertise, and negotiation skills make commercial real estate transactions successful despite market volatility. Borrowers use brokers to get loans on favorable terms and close the transaction faster.
At the same time, CRE brokers help lenders extend loan books and minimize lending risks by connecting with financially stable borrowers. AVANA Companies and AVANA CUSO foster hospitality and commercial real estate industry growth by partnering with experienced brokers.
Our private credit partnership with Oaktree enables us to provide $250 million to entrepreneurs in the CRE sector as construction and bridge loans. At the same time, we ramp up hotel development in the USA via a Co-lending construction program with IHG. The AVANA-Oaktree and AVANA-IHG partnerships create opportunities for us to partner with CRE and hotel brokers to meet the funding needs of entrepreneurs by securing tailored credit solutions.
Want to close deals for your clients with faster timelines and execution certainty? Contact us today.
