The two most important days in your life are the day you are born and the day you find out why.”—Mark Twain
U.S. banks are seeing some of the lowest loss rates of the past six years on commercial real estate and construction loans,boosting their case for increased lending activity in the sector.
Data from Sageworks, a financial information company, show that net charge-offs for commercial real estate loans (non-farm, non-residential) were 0.16% of average loan balances in the most recent quarter. This is down from 0.9% at the end of 2009 and 13 basis points below June 2013 quarter rates. Loss rates for construction and land development loans have fallen from 3.58% of average loan balances in December 2009 to 0.24% in the most recent quarter.
Sageworks analyst Regan Camp said that in addition to falling loss rates, the improving economy and increased competition for attractive borrowers in the commercial and industrial lending space may also contribute to a sense of confidence in lending activity in this sector.
“The good news is that as more banks move back into real estate lending, it will present more options for borrowers,” Camp said. Increased competition for borrowers might allow for more appealing terms or incentives, he noted.
Indeed, the Federal Reserve’s recent Senior Loan Officer Opinion Survey found banks on balance have been easing standards on most types of commercial real estate. And the FDIC’s latest quarterly report showed banks’ commercial real estate lending has increased to levels unseen since 2007.
For several years, Camp said, banks moved away from commercial real estate lending because of losses tied to real estate loans before the Great Recession. Demand, too, had been weak as contractors and investors either collapsed or backed off dramatically in the wake of real estate market woes.
But the Mortgage Bankers Association noted recently that commercial bank portfolio loans for commercial and multifamily mortgage loans increased 19% in the second quarter from a year earlier. Meanwhile, the dollar volume of commercial/multifamily mortgage loans originated for Fannie Mae, Freddie Mac and commercial life insurance companies decreased in the same period.
Other reports have noted increased lending for residential and commercial construction projects as more banks of all sizes have entered the space. Fitch Ratings expects commercial construction activity will continue to be fueled by easing lending standards and improving industry fundamentals.
“Initially, the early movers jumped on the C&I lending wave, and there were probably a lot of opportunities there for banks,” Camp said. “As more lenders move to that, all of sudden there’s not as much opportunity, so banks may be saying, ‘Let’s back off and go back to the lending that we know, and the lending that we know and opportunities that have been there are in commercial real estate.’”
Commercial real estate loans as a percentage of total loans and leases at U.S. banks have slowly increased since 2008. These loans now make up 24.68% of portfolios, compared to 19.55% as of March 2008, according to data from Sageworks Bank Information, a web-based data platform. Construction and land development loans were 5.14% of total loans and leases in the June-ended quarter, down from 8.88% in March 2008.
Low demand for credit and fewer credit-worthy projects were the biggest challenges for banks in making commercial real estate loans, according to a survey released in April by the American Banking Association. But hard caps on commercial real estate lending imposed by regulators and other supervisory requirements were cited 22% of the time in the survey.
Camp said that risk is an important factor for banks, which are under increased regulatory scrutiny and requirements to adequately stress test their commercial real estate portfolios.
“Banks have been burned before and regulators want to know, did they learn their lesson?” he said. “Even though confidence has come back significantly, I don’t think anyone’s 100% certain it won’t happen again.”
A recent report by the Real Estate Research Corporation (RERC)cautioned that increased demand for commercial real estate and competition for high-quality assets will cause asset prices to overtake their property values in certain sectors.
“The relationship between the value versus price of commercial real estate is precariously balanced,” said Ken Riggs, RERC president and CEO in a statement on the report. “Our analysis showed upward pressure on pricing without a corresponding increase in value, and when this happens, investors may be forced to accept lower returns for assets with added risk.”
Sageworks, a financial information company, collects and analyzes data on the performance of privately held companies and provides accounting and risk management solutions.
A little about me and my expertise – video
commercial / investment real estate / Arizona land specialist
https://www.youtube.com/watch?v=PPs3kpKR4nY
I go to great heights to sell or purchase your land
http://walter-unger.com/?p=10118
http://en.wikipedia.org/wiki/Timeline_of_Phoenix,_Arizona_history
3
Facts of Arizona – year 1848 to 2013
http://walter-unger.com/?p=9507
4.
Feel free to contact Walter regarding any of these stories, the current market, distressed commercial real estate opportunities and needs, your property or your Investment Needs for Comercial Investment Properties in Phoenix.
View my listings and my profile at:
http://www.loopnet.com/profile/14101172900/Walter-Unger-CCIM/Listings/
Please go to my web-site and get all the newsflashes and updates in Commercial Investment Real Estate in Phoenix and Commercial Investment Properties in Phoenix daily
Check out my professional profile and connect with me on LinkedIn.
Follow me on Facebook:
http://www.facebook.com/ungerccim
Follow me on Twitter:
https://twitter.com/Walterunger
Follow Me on Google+
https://plus.google.com/u/0/b/114560883588623379451/
Walter Unger CCIM, CCSS, CCLS
I am a successful Commercial Investment Real Estate Broker in Arizona now for 20 years and I worked with banks and their commercial REO properties for 3 years. I am also a commercial landspecialist in Phoenix and a Landspecialist in Arizona.
WHETHER YOU LEASE OR OWN
NOW IS THE TIME FOR YOU TO EXPAND, UPGRADE OR INVEST.
we are at on the a rise of the cycle in Commercial Real Estate. so there is only one way and it’s called we are going up and now is the time for you to expand, upgrade or invest in Commercial Properties in Phoenix. The prices on deals I may get you will not be around forever.
If you have any questions about Commercial Investment Properties in Phoenix or Commercial Investment Properties in Arizona, I will gladly sit down with you and share my expertise and my professional opinion in Commercial Properties in Phoenix or Commercial Properties in Arizona with you.Obviously I am also in this to make money, but it could be a win-win situation for all of us.
Please reply by e-mail walterunger@ccim.net or call me on my cell 520-975-5207 or Office:480-948-5554
Thank You
Walter
Walter Unger CCIM
Associate Broker, West USA Commercial Real Estate Advisers
7077 E. Marilyn Road, Bldg 4, Suite 130
Scottsdale, AZ 85254
Cell: 520-975-5207
Office : 480-948-5554
Fax: (480-658-1172
View my listings and my profile at:
http://www.loopnet.com/Profile/14101172900/Walter-Unger-CCIM/
a little about me and my expertise – video
commercial-investment real estate adviser-land specialist
https://www.youtube.com/watch?v=PPs3kpKR4nY
Delivering the New Standard of Excellence in Commercial Real Estate
- Commercial Real Estate Scottsdale
- Commercial Real Estate Phoenix
- Commercial Real Estate Arizona
- Commercial Investment Properties Phoenix
- Commercial Investment Properties Scottsdale
- Commercial Investment Properties Arizona
- Land Specialist Arizona
- Arizona Land Specialist
- Land Specialist Phoenix
- Phoenix Land Specialist
- Land For Sale Phoenix
- Land for sale Arizona
- Commercial Properties For Sale Phoenix
- Commercial Real Estate Sales Phoenix
- Commercial Properties Phoenix
- Commercial Properties Arizona
- Commercial Land Specialist Phoenix
- Commercial Land Phoenix
- Multifamily land Phoenix
- Retail Land Phoenix
- Industrial Land Phoenix
- Land Commercial Phoenix
- Land Retail Phoenix
- Land Industrial Phoenix
- Land Multifamily Phoenix
- Industrial Land for sale Phoenix
- Land Industrial
- P
- Investment Real Estate
Disclaimer of Liability
The information in this blog-newsletter is for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation. Tax articles in this e-newsletter are not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding accuracy-related penalties that may be imposed on the taxpayer. The information is provided “as is,” with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose.