Liquidity within global real estate financing markets remains deep. Several major catalysts — including the health crisis; the macro environment; a raft of sector-specific headwinds; and increased climate risk and environmental, social and governance (ESG) requirements — are collectively institutionalizing change in how the financing market is structured and how loans are underwritten. Overall, the debt markets are in relatively good shape as we begin the new year, but headwinds seemingly from every direction are complicating the risk assessment for lenders.

Real estate lenders must balance external (e.g., COVID-19 and the macro environment) and internal (e.g., ESG requirements and sector-specific evolutions) influences when underwriting loans in the maturing global real estate debt market.

COVID and the macro environment

COVID-19 remains a major public global health crisis. The outlook for the global economy will depend on the evolution of