Highway Access

Definition of Highway Access

In the context of commercial mortgages, Highway Access refers to the physical and legal ease with which vehicles can enter and exit a commercial property from a major state or federal highway system. It encompasses not just the proximity to a thoroughfare, but also the quality of the infrastructure connecting the property to the main traffic flow, including ramps, frontage roads, and traffic signals.

Lenders view highway access as a critical determinant of property value and long-term viability. For a commercial mortgage, "good access" implies that the property is easily reachable by customers, suppliers, and employees without significant navigational hurdles or congestion delays.

Detailed Description and Importance in Underwriting

When a commercial lender evaluates a loan application, the property's access to major transportation arteries is a primary factor in the risk assessment process. Highway access directly influences the following areas:

• Property Valuation and Appraisal: Appraisers assign higher values to properties with superior highway visibility and access. A property that is "landlocked" or requires complex U-turns to reach will often see a significant reduction in its market value, which in turn affects the Loan-to-Value (LTV) ratio.
• Tenant Demand and Retention: For retail and industrial assets, highway access is the lifeblood of operations. Lenders prefer properties that can easily attract high-quality national tenants, as these tenants prioritize locations that offer efficient logistics or high consumer drive-by traffic.
• Income Stability: Properties with poor access often suffer from higher vacancy rates. From a mortgage perspective, consistent Debt Service Coverage Ratio (DSCR) is dependent on the property remaining occupied. Strong highway access serves as a safeguard against prolonged vacancies.

Key Factors Evaluated by Lenders

Lenders and underwriters typically look at several specific sub-factors when analyzing highway access:

• Ingress and Egress: This refers to the "on-off" capability of the site. Lenders look for deceleration lanes, dedicated turn lanes, and signalized intersections that allow for safe and efficient movement of traffic into the property.
• Visibility and Signage: While related to access, visibility is the ability of a driver to see the property from the highway. High visibility often complements access, making the property a more attractive collateral for a loan.
• Traffic Counts: Lenders review Annual Average Daily Traffic (AADT) data. High traffic counts generally correlate with higher demand for the property, though the access must be sufficient to handle that volume without creating bottlenecks.
• Last-Mile Logistics: For industrial mortgages, highway access is viewed through the lens of transit times. The proximity to "interchanges" (where two or more highways meet) is a major factor in the underwriting of distribution centers and warehouses.

Impact on Different Asset Classes

The weight given to highway access varies depending on the type of commercial property being financed:

• Retail: Requires immediate, convenient access for consumers. Poor access can lead to "dead" retail space, making it a high-risk proposition for a lender.
• Industrial/Flex: Focuses on truck maneuverability. Lenders look for wide turning radii and clear paths to the interstate to ensure heavy freight can move efficiently.
• Hospitality: Hotels rely almost entirely on being easily reachable from highway exits. For hospitality mortgages, proximity to an exit ramp is often a non-negotiable requirement for Tier-1 financing.
• Office: While less critical than retail, highway access for office buildings is evaluated based on the commute times for the regional workforce.