Bank and CMBS loan originators in the U.S. commercial real-estate market tightened their lending standards for all types of commercial real estate loans – including Philly office space and Philly retail space – during the first quarter, a marked reversal for national and Philadelphia commercial real estate listings from the previous few years.
According to the latest Federal Reserve Senior Loan Officer Opinion Survey released this week, a significant number of banks serving the U.S. and Philadelphia commercial real estate market reported tightening standards for construction and land development loans and for loans secured by multi-family properties. The report on national and Philadelphia commercial properties was made available through Philadelphia commercial real estate broker Wolf Commercial Real Estate, a Philadelphia commercial real estate brokerage firm.
Additionally, a moderate number of banks servicing the U.S. commercial real estate market reported tightening standards for loans secured by office, industrial, retail and hotel properties. Also, while lenders were tightening their underwriting standards in all market categories – including Philly office space and Philly retail space – demands for several types of CRE loans continued to grow.
In particular, the Fed’s survey of senior loan officers in the commercial real estate market found a moderate net fraction of U.S. banks reported increasing maximum loan size but tightening of their loan-to-value ratios for U.S. and for Philadelphia commercial properties. Another modest net fraction reported tightening debt-service coverage ratios. Survey respondents indicated that other loan terms remained basically unchanged, on net, over the past year.
The Fed also asked bank loan officers about their responses to conditions in the CMBS markets over the past six months. A moderate net fraction of banks reported moderately increasing the volume of origination of CRE loans in relation to U.S.and Philadelphia commercial real estate listings, while a significant fraction reported moderately decreasing the volume of CRE loan securitization.
When asked about the anticipated large amount of CRE loans originated in 2006 and currently held in CMBS that will need to be refinanced over the next six months, a moderate net fraction of banks noted they expect standards for these refinancings to be somewhat tighter than standards they expect to apply to other CRE loans.
The results of the survey, “were both important and largely inconclusive in most ways,” said Christina Zausner, vice president, industry and policy analysis at CRE Finance Council. “After the Fed’s warning to the market on Dec. 18, 2015, it is interesting to see that the survey results largely suggested that CRE bank lenders are reacting to a changing environment in a moderate fashion – many holding, some taking new cards and some folding.”
For more information about Philly office space, Philly retail space or other Philadelphia commercial properties, please call 215-799-6900 to speak with Jason Wolf (jason.wolf@wolfcre.com) Leor Hemo (leor.hemo@wolfcre.com) or Lee Fein (lee.fein@wolfcre.com) at Wolf Commercial Real Estate, a leading Philadelphia commercial real estate broker that specializes in Philly office space and Philly retail space.
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