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Commercial Real Estate Lending Grows

Posted At : February 4, 2012 12:03 PM
| Posted By : Nancy Coffman
Related Categories: Real Estate

As economic conditions have improved, the U.S. commercial real estate (CRE) lending business has begun to pick up. For the first time in five years, a majority of banks are talking about their ability to increase their loan portfolios.

Although this feeling is not unanimous, nor is the projected lending growth strong, bank executives have begun to signal that they are ready to return to CRE lending. Opportunities are appearing in select markets and particular asset classes. However, some banks are still being aggressive in writing off some loans, particularly construction loans, and are trying to sell off their foreclosed real estate inventory and nonperforming loans as best as they can.

The Federal Reserve Board's latest Senior Loan Officer Opinion Survey confirmed anecdotal evidence. U.S. bank loan officers reported that demand for CRE loans had strengthened over the past three months. Domestic banks reportedly eased maximum CRE loan sizes and trimmed loan rate spreads.

Growth in CRE lending is likely to be limited and cautious in 2012, but investors who financed at the peak of the market five years ago may find that the lending environment couldn't be better. As mortgage production increases, investors will see banks being more competitive in pricing.

Initially, it is likely that those that are good shape that will stand to benefit first, and financing terms are likely to continue to be tight. Banks also may use the opportunity to restructure the makeup of their portfolios--weeding out the less creditworthy.

One area that may do well in 2012 is existing CRE-lender relationships. As they become more active and further credit extensions are allowed, amortization and other prepayments may be helped. The REIT arena may be more active as well.

Some bank executives feel that the principal CRE marketplace is generally strong. In many cases, loan-to-values (LTVs) are very low, indicating that there is a lot of money in investing in real estate. Commercial loans at low LTVs are very attractive.

Refinancing is a hot topic among CRE lenders. Many loans with five-year maturities are not yet matured and are being looked at as to whether they are good prospects for renewal or repricing. Some banks are discussing refinancing existing loans and are lowering rates.

In general, loan growth will be selective by market and asset type. Multifamily was frequently mentioned as an area of potential growth, along with middle-market industry segments such as restaurants, health care and energy.

Click here for the complete CoStar Group News article.

Contact an MCB Real Estate Tax Adviser at 703.218.3600 and start building a relationship with a CPA firm who strives to earn your RESPECT and CONFIDENCE as a TRUSTED business adviser. MCB has relationships with several commercial real estate bankers and would be pleased to refer you to a banker based on your commercial real estate lending needs.