Instant Insights / Capital Markets

A look at how the capital markets are treating commercial real estate.


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Paul Fiorilla

WASHINGTON, DC–The latest Senior Loan Officer Opinion Survey from the Federal Reserve offers good news for business in general, reporting that terms and conditions for loans have continued to ease. The commercial real estate sector, though, received no such love. Banks kept commercial real estate lending standards about unchanged on balance, it said. It wrote:

Regarding the levels of standards on CRE loans, domestic banks, on balance, reported that the current levels of their standards on most major categories of these loans are at the relatively tighter ends of the ranges that have prevailed since 2005. Significant and moderate net percentages of domestic banks reported that current levels of standards are tighter than the respective midpoints on loans for construction and land development purposes and on loans secured by multifamily residential properties, respectively. On net, banks’ current level of lending standards on loans secured by nonfarm nonresidential properties is reported to be around the midpoint of the range of standards that have prevailed since 2005. Major net shares of foreign banks reported relatively tight current levels of standards on construction and land development loans and loans secured by nonfarm nonresidential properties, and a significant net fraction reported so for multifamily loans. Compared to the July 2017 survey, domestic banks’ current levels of CRE lending standards appear generally less tight, while foreign banks’ current levels of such standards appear to have tightened on balance.

$1.8 Trillion in CRE Bank Lending

The Fed’s language, though, doesn’t seem to adequately capture the strong levels of CRE bank lending since the end of the recession. Since 2012, bank holdings of commercial and multifamily mortgages have grown 37.3% to $1.8 trillion, according to a recent report by Yardi Matrix. That compares with the more than the $1.2 trillion banks held ten years ago at the height of the last lending boom. Yardi counted the nation’s 5,300 banks to come up with these figures but it also noted that the fastest-growing segment of CRE lending is coming from regional and local banks.

Erika Morphy

Erika Morphy has been writing about commercial real estate at GlobeSt.com for more than ten years, covering the capital markets, the Mid-Atlantic region and national topics. She's a nerd so favorite examples of the former include accounting standards, Basel III and what Congress is brewing.

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