Some design trends are predictable, like floral patterns, neutral colors, or certain materials becoming popular. Others are a bit more puzzling, like the emerging “Pickle Fix” trend. Pinterest has noted that the pickle aesthetic, based on the colors and textures of pickles, is going to become a fad for both décor and fashion in 2025. While nobody really saw the Pickle Fix coming, anyone in the financial industry likely predicted the growth of private lending.Yesterday, we explored how shifting bank lending standards have led to a rise in private lending for commercial real estate (CRE) loans. While nonbank lenders provide flexibility and easier access to capital, borrowers often face inconsistent loan approvals, shifting terms, and a lack of transparency.Today, we’ll examine how Community Financial Institutions (CFIs) can turn these market shifts into a competitive advantage — leveraging their strengths in relationship-based lending, local expertise, and efficient decision-making to win more CRE loan deals.How CFIs Can Compete and WinTo remain competitive in today’s evolving CRE market, CFIs should leverage their strengths in service, transparency, and local expertise to differentiate themselves. Here are four key strategies to help:1. Assessing Borrowers Based on Market PerformanceNot all CRE sectors and metro areas are equally positioned for growth. CFIs should closely track regional economic trends, vacancy rates, and rental growth by sector to identify which property types and markets offer the best risk-adjusted returns. For example:
- Multifamily housing is strong in Sun Belt cities like Austin, Charlotte, and Phoenix, where population growth continues to drive demand.
- Industrial properties continue to outperform, particularly near growing logistics hubs like Dallas-Fort Worth and the Inland Empire in California.
- Retail and office markets are mixed, with suburban retail and mixed-use developments often faring much better than their urban counterparts.
By aligning lending strategies with local market conditions, CFIs can avoid overexposure to struggling CRE sectors and focus on financing high-potential projects.2. Enhancing Deal Speed and TransparencyAlthough it’s true that “beggars can’t be choosers,” at the same time, today’s borrowers have grown increasingly comfortable with online applications and support. Simply put, to stand out from the crowd, the entire lending experience and process — on a mobile device, in front of a monitor, and in person — has to be clear, engaging, and efficient.Consequently, CFIs should:
- Simplify loan documentation to reduce approval times and create an easy-to-follow, step-by-step loan application process borrowers can complete independently.
- Improve digital communications with borrowers at every step of the process. Notably, since most borrowers may never walk through a CFI’s doors, it’s important to consider different types of digital outreach, like video calls rather than just phone calls.
- Leverage new technologies to speed up underwriting without sacrificing risk management (just one example). Banks are often slow at adopting new solutions in their tech stacks, so CFIs that do will stand out to potential borrowers.
Efficiency will always be king. By providing faster, more transparent lending experiences, CFIs can stand out from nonbank lenders, which are often very impersonal and transactional, leading to consistently disappointing borrower experiences.3. Targeting Niche Lending OpportunitiesRather than competing on price alone, CFIs should identify underserved segments where they can offer expertise. Owner-occupied CRE, small business property loans, and community redevelopment projects are areas where deep market knowledge can provide a competitive edge over private lenders focused on larger, institutional deals.While nonbanks focus on transactional lending, CFIs can build long-term relationships by advising clients on market risks and opportunities, offering flexible repayment structures that adjust to market shifts, and providing ongoing financial education. This consultative approach enhances borrower loyalty and positions CFIs as partners in long-term CRE success.4. Know What Nonbank Borrowers Want MostMany nonbank borrowers remain uncertain about the future of their financing, with 38% expecting lending challenges to remain consistent and another 38% anticipating greater difficulties ahead.Notably, more than half of nonbank borrowers (NBBs) are diversifying their lender relationships (55%) and asset holdings (54%) to reduce exposure to any single risk factor.
CFIs that understand why NBBs stopped working with banks as well as what they are looking for going forward will have many opportunities to stand out from the crowd.Capitalizing on a Changing Lending MarketThe commercial property lending market is evolving rapidly, but borrowers continue to value the consistency, reliability, and expertise that CFIs provide — qualities that many nonbanks struggle to match.By leveraging technology, enhancing digital experiences, and identifying strategic lending opportunities, CFIs can maintain their competitive edge in the post-pandemic CRE landscape. As transaction volumes surge and borrower expectations shift, the institutions that successfully blend high-touch relationships with high-tech efficiency will emerge as the preferred lenders in today’s market.
