U.S. banks are reportedly relaxing their lending standards on some commercial real estate loans. This marks the first time in nearly three years that lenders have taken such a move on commercial loans, the CoStar Group reports.
The Federal Reserve’s first quarter survey of senior loan officers shows that banks are easing standards and terms on commercial and industrial loans to large and middle-market firms. They have mostly left loan standards unchanged, however, for smaller firms. They’ve tightened standards on multifamily loans.
Nearly all banks reported they had eased their credit policies, citing more aggressive competition from other banks or non-bank lenders as the chief reason, according to the April 2018 Senior Loan Officer Opinion Survey on Bank Lending Practices. Many banks surveyed said many factors prompted them to ease credit policies over the past year: an increased tolerance for risk and more favorable or less uncertain outlooks for property, vacancy rates, or other fundamentals, and for capitalization rates on properties.
The easing of standards coincides with reports that are showing a weaker demand for loans across commercial real estate categories and a reduced number of property acquisitions or new developments, the CoStar Group reports.
“Despite an increase in financial market volatility, real estate capital markets remain in good shape and the supply/demand balance for commercial mortgage lending is favorable to borrowers,” says Brian Stoffers, CBRE’s global president for capital market debt and structured finance. The latest CBRE Lending Momentum Index, which reflects the pace of U.S. commercial loan closings, dropped 8.8 percent between December 2017 and March 2018.
Source: “For the First Time in 3 Years, Banks Ease Lending Standards for Commercial Real Estate Loans,” CoStar Group (May 16, 2018)
