The nation’s 25 largest banks, which collectively control more than $11 trillion in assets, reduced their exposure to commercial real estate loans across the board last month, reflecting an ongoing change in the CRE finance markets, and a softening in loan demand.
The amounts on the largest banks’ books for construction and development, multifamily and nonresidential loans in the nation’s commercial real estate market – including Philly office space, Philly retail space and Philly industrial space – all were down at the end of January compared to year end, according to weekly Federal Reserve Bank data. This was the first time all three have dropped in the same month since the Federal Reserve started tracking the individual categories in January 2015.
This CoStar report on real estate loan balances is being offered through Philadelphia commercial real estate broker Wolf Commercial Real Estate, a Philadelphia commercial real estate brokerage firm.
Leading the decline was a $2.7 billion drop in nonfarm, nonresidential loans, resulting in an annualized decline of more than 7.5 percent. This is fifth-consecutive month the category has shrunk, the seventh time in the last eight months, and the largest-ever month-to-month decline. Over the last eight months, the amount of nonresidential commercial loans involving the U.S. and Philadelphia commercial real estate markets has dropped by $7.6 billion.
In their fourth-quarter earnings conference calls over the last few weeks, several of the nation’s largest banks working with national and Philadelphia commercial real estate listings reported that some CRE deal activity was being pushed further into 2018, a resurgent CMBS market and competition from smaller banks as well as life insurers also were taking away business.
Some of the decline in the U.S. commercial real estate market – including Philly office space, Philly retail space and Philly industrial space – can be attributed to pipelines being a little softer going into the year following year-end deal activity, said John Turner, president and head of Regions Financial Corp. (NYSE: RF) Corporate Banking Group. But he added, Regions has also intentionally been shrinking and de-risking its investor real estate book.
Weekly Federal Reserve numbers tracking loans on U.S. and Philadelphia commercial real estate listings also show construction and development loans have dropped by $700 million in January from year-end, also an annualized decline of more than 7.5 percent.
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) 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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