Commercial Real Estate Lending Soars at U.S. Banks
Commercial real estate lending has ballooned at U.S. banks with more than $100 billion in new loans added to the books in the past four quarters, up 6.6% to a total of more than $1.65 trillion (excluding farming), according to a CoStar Group report based on the newest FDIC numbers.
The increase in commercial real estate lending bodes well for new construction projects getting underway nationwide, including those that will bring new Philly office space and Philly retail space to Philadelphia.
The fastest-growing category in commercial real estate lending remained the multifamily lending sector, which rose 14.5% during the past four quarters to a total of $289 billion, Costar said. Banks are again favoring construction and development lending with activity in this sector up 11.9% in the past four quarters to a total of $230 billion, CoStar said.
Other nonresidential commercial real estate lending increased 6% to $654.5 billion, CoStar reported. The only other category the FDIC breaks out in bank lending is owner/occupied properties, which remained mostly flat, rising less than one percent to $478.7 billion and reflecting banks’ wariness regarding small business lending, CoStar said.
CoStar also noted that the quality of commercial real estate loans currently on the books continues to strengthen with the amount of past due loans held by banks shrinking to less than $30 billion at the end of the third quarter 2014, a drop of 6.6% in the past year and down approximately $119 billion from the height of the Great Recession five years ago when banks held almost $149 billion in delinquent commercial real estate loans.
As the quality of loans of loans continues to improve, more banks are willing to approve commercial real estate lending for major projects such as the Philadelphia office space and Philadelphia retail space construction projects currently underway in Center City Philadelphia.
CoStar also reported, the amount of charge-offs on real estate loans secured by nonfarm nonresidential properties declined 61.1 percent or $360 million.
The number of foreclosed properties held by banks dropped dramatically again, down 22 percent from a year ago to $13.1 billion. The drop in the past year — $3.78 billion — represents a rate twice as fast as the four previous years combined.
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