The construction and development (C&D) lending category for U.S. banks was once again the most rapidly growing loan category in 2016 for the U.S. commercial real estate market – including Philly office space, Philly retail space and Philly industrial space – following a year of outsized lending growth in 2015. C&D lending by banks surged almost 14% in 2016, topping 13% growth in 2015.
This compares with total loan growth in the U.S. and Philadelphia commercial real estate markets of just 5% in each of the two years prior to that, according to data from a leading bond rating agency.
This report on national and Philadelphia commercial properties is being made through Philadelphia commercial real estate broker Wolf Commercial Real Estate, a Philadelphia commercial real estate brokerage firm.
C&D lending among banks involved in U.S. and Philadelphia commercial real estate properties remained strong despite a slowdown in many other categories, particularly in the second half of the year. Growth slowed considerably for many other lending categories, notably residential mortgages, auto and commercial and industrial (C&I).
After posting the largest percentage lending upsurge in this category during 2016 of 58%, overseas banks with US branches dealing with both national and Philadelphia commercial real estate listings appear to be backing off making loans in this category this year, decreasing their holdings in this category in 2017 to pre-2016 levels.
Banks doing business in the U.S. commercial real estate market – including Philly office space, Philly retail space and Philly industrial space – posted a 12% lending increase, with that growth unevenly split between large and small banks – 8% growth in C&D lending vs. 15% growth respectively.
Given considerable competition and pricing pressures in most loan categories in relation to U.S. and Philadelphia commercial real estate listings, bankers may be tempted to ramp up their C&D lending, a comparatively higher margin, but also higher risk loan product, the bond rating agency data show.
However, banks still appear to be mindful of the painful lessons from the recent past. Even with the surge in lending over the past two years, C&D exposure for the bank industry remains below pre-2008 financial crisis levels, KBRA added. For all banks, C&D loans represented 3.4% of total loans as of year-end 2016 compared with a peak level of 8.4% as of year-end 2007.
For more information about Philly office space, Philly retail space and Philly industrial space or other Philadelphia commercial properties, please call 215-799-6900 to speak with Jason Wolf (jason.wolf@wolfcre.com), Christopher R. Henderson (chris.henderson@wolfcre.com), Tony Banks (tony.banks@wolfcre.com) or Drew Maristch (drew.maristch@wolfcre.com) at Wolf Commercial Real Estate, a leading Philadelphia commercial real estate broker that specializes in Philly office space, Philly retail space and Philly industrial space.
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