Working Paper

Intermediary Segmentation in the Commercial Real Estate Market

Abstract: Banks, life insurers, and commercial mortgage-backed securities (CMBS) lenders originate the vast majority of U.S. commercial real estate (CRE) loans. While these lenders compete in the same market, they differ in how they are funded and regulated, and therefore specialize in loans with different characteristics. We harmonize loan-level data across the lenders and review how their CRE portfolios differ. We then exploit cross-sectional differences in loan portfolios to estimate a simple model of frictional substitution across lender types. The substitution patterns in the model match well the observed shift of borrowers away from CMBS when CMBS spreads rose in 2016.

Keywords: Commercial real estate; Life insurers; Segmentation;

JEL Classification: G21; G22; G23; R33;

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Bibliographic Information

Provider: Board of Governors of the Federal Reserve System (U.S.)

Part of Series: Finance and Economics Discussion Series

Publication Date: 2019-11-15

Number: 2019-079

Pages: 54 pages