2021 CONSTRUCTION FINANCE TRENDS

State of Construction Finance x

Each year Rabbet surveys commercial real estate lenders and developers to uncover the latest industry trends in CRE. In 2020’s report, lenders and developers alike struggled with technology, efficiency and the exchange of information. These struggles did not go away this year.

In fact, the pandemic further uncovered these struggles and the need for optimization in the current construction finance management process. Now, a year later, this report dives deep into how processes and perceptions of construction finance have changed as well as what these processes could look like in the future.
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Download the 2021 State of Construction Finance Report 

This year’s report focuses on four key areas:

  • The Pandemic’s Impact
  • Top Challenges 
  • The Current Draw Process
  • Technology

 The Pandemic’s Impact

Now that we are over a year into the global pandemic, we aimed to learn about how lenders, developers and their teams were adapting to the “new norm.” Some of these process shifts are here to stay; however, many businesses are restoring some of their pre-pandemic practices.

There was a significant trend towards moving back to an in-person office space for both lenders and developers.

2021 State of Construction Finance

100% of developers noted that their teams will likely return in-office soon and only 21% of lenders said a portion of their team will continue working remotely.

Top Challenges 

We learned that areas which were challenged previously were further illuminated by the pandemic. Unlike in previous years, we noticed an openness to change that we haven’t previously seen in past reports. 

Lenders and developers mentioned strains on their current communication channels both internally and externally.

Lenders felt external communication, along with reporting and analyzing data across projects, are their biggest challenges. 

2021 State of Construction Finance

These challenges are not new, but the perception of these challenges are. Now, teams are understanding these challenges and looking for solutions. 

The Current Draw Process

One of the biggest challenges to the construction finance process is submitting and funding draw requests. These requests happen frequently; yet, the process is arduous and inefficient.

Only 59% of draws are completed without errors according to lenders, whereas developers report only receiving change requests 35% of the time.

2021 State of Construction Finance

Information is trapped in spreadsheets that have to be shuttled back and forth from internal and external stakeholders which allows room for multiple forms of the same document to be in motion at one time. These manual processes leave room for more error which leads to corrections and revisions that add even more time to an already lengthy process.

Technology

These construction finance processes have been executed this way for decades; however, now many lenders and developers are seeing improvement to their process via digitization

95% of respondents felt that a part of their current process could be automated.

2021 State of Construction Finance

The hope is that technology can take over many of the manual processes and bottlenecks that occur in the current process to help manage risk and reduce errors

Trends and Takeaways

After looking at all the survey responses across lenders and developers, we identified key trends.

  • Usage of more digital processes now than before the pandemic
  • An expectant move back toward in-office operations in some form to strengthen communication channels
  • Many opportunities to mitigate the risk of error via automation and centralization of data in internal and external communication channels
  • A Shift towards process optimization and away from manual data entry and spreadsheets

The full report dives deeper into this as well as other trends developing for 2021.

Are you prepared for the rest of 2021 and beyond?

Now that you have a taste of what to expect, grab your copy of the 2021 State of Construction Finance Report and dive into the insights. Whether you’re a lender, developer, part of a CLM group or a seasoned CRE professional, staying up to date on the latest industry trends is critical. Arm yourself with data to drive change and achieve new efficiencies in your own organization today. 

Want to talk with someone about your current construction finance process and how technology might be able to help? Contact Rabbet, we’d love to hear from you!