US commercial real estate lending picking up

Sixteen banks (with assets totalling $7.62bn) have gone bust in the US this year, and in seven cases, what drove them under was exposure to commercial real estate. And yet, US banks are getting back into the CRE game. CoStar provides a detailed look at the trend.

Total renewals of existing commercial real estate accounts increased 57% from November to December of last year, according to numbers released this week by the U.S. Department of Treasury. Treasury completes a monthly tally of lending activity of the nation’s 20 largest bank, which control 57% of all U.S. banking assets.  While seasonality contributed to the increase — as year-end is an active time for renewals — new lending also more doubled in December from the previous month. Total new commercial real estate commitments increased 157%. That was the first increase in four months.

The cost of keeping existing loans on bank books is significant. At least if you’re looking to do new business with a bank.

Approaching maturities will continue to share the stage in 2010, with more than 67% of life company respondents acknowledging 40% to 60% of their portfolios will be allocated to the refinancing of maturing loans.

While liquidity within the capital markets is expected to turn from a trickle to a slow-but-steady flow in 2010, borrowers can expect the same tightened underwriting standards they experienced from life company lenders in 2009.  Loan to value ratios in 2010 will fall predominantly in the 50% to 70% range, according to more than 74% of life company respondents, and that number is expected to remain steady in 2011. As for new conventional commercial real estate loans in 2010, 59% say most loan terms will range five years or greater, with an additional 28% indicating a preference for three to five year terms.


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