WASHINGTON, DC-Last quarter Chandan Economics hinted that construction finance, which never really got its groove back since the recession, seemed to be at the edge of an inflection point. Fast forward three months and we see they were correct. After falling 68%, net lending for construction projects turned a corner in the second quarter of 2013, increasing slightly for the first time since the first quarter of 2008.

Furthermore, small regional banks were just as likely to ramp up net lending as the largest banks, even where they had significantly higher concentrations in commercial real estate. In fact, a larger share of small banks increased construction lending.

Indeed we don't have to look far or hard in the DC area for examples of this activity.

As one example, there is PRC LLC, which announced on Wednesday that it has secured a construction loan to finance the redevelopment of 11141 Georgia Ave., an existing five-story office building in Wheaton, MD, into a 12-story 194-unit residential tower. It secured the financing for Lowe Enterprises Investors, which acquired the building in 2011 on behalf of a pension fund client.

RBS Citizens Bank, through its Washington DC team of Timothy Leon and Elizabeth Paulson provided the financing. The PRC team consisted of Patti Earnest,  Stephanie Lynch and Lindsay Stroud.

We can expect to see more transactions, if Chandan Economics' analysis bears out. "As the economy improves and competition for lending on stabilized properties increases, more banks are expected to lend in support of construction, which is uncontested by CMBS lenders," it predicted.

But construction finance is only one small part of the commercial real estate finance markets; fortunately its forward momentum is being reflected throughout the industry's capital arc this quarter.

In general, Chandan Economics reports that commercial real estate lending by banks registered a net increase of $18.5 billion during the second quarter--the second-largest improvement since the financial crisis. It also found that banks' net lending on multifamily properties increased by $7.4 billion during the quarter, and net lending on commercial properties increased by $11.1 billion. Excluding owner-occupied commercial properties, net lending on income-producing commercial properties increased by $9 billion.

Chandan Economics also noted that the default rate on banks' multifamily and commercial real estate loans fell to 2.2 percent, the lowest level since Q4 2008—a point that the Mortgage Bankers Association makes separately in its own newly-released statistics.

"Commercial and multifamily loan performance continued to improve during the second quarter, with delinquency rates falling for every major investor group," said Jamie Woodwell, MBA's Vice President of Commercial Real Estate Research in the report. "The quarterly decline in the delinquency rate of loans held in commercial mortgage-backed securities was the largest on record, and delinquency rates for loans held by life companies and the GSEs remain low and fell lower during the quarter."