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National Mortgage Professional
Jun 30, 2005

Bankers turn bullish on commercial real estatemortgagepress.comcommercial market, bankers, lending activity Bankers plan to increase their commercial real estate lending for the first time since 2003, according to the fourth annual industry survey conducted by Bridger Commercial Funding. But while their bullishness on commercial real estate points to the sector's continued recovery, a majority of bankers foresee moderate performance in each major property sector in 2005. In the strongest sign in more than two years that commercial real estate will play a key role in fueling banks' loan growth, 64 percent of bankers surveyed expect higher commercial real estate loan volume this year, up from 51 percent one year ago. Similarly, almost every survey respondent (95 percent) reported a mandate to increase their commercial real estate loan portfolios at their institutions, up from 86 percent last year. Despite banks' shift toward increased commercial real estate lending, the majority of loan officers surveyed foresee moderate performance for each major property type during the next year, paralleling their views at the beginning of 2004. Retail's expected performance continues to outpace all other property types, according to 96 percent of bankers surveyed, similar to their 2004 outlook. However, substantial positive outlook shifts appeared for office properties, with 86 percent favorable versus 65 percent favorable one year ago. And lodging's continued recovery is evidenced by a doubling of strong expectations for the sector in 2005 versus 2004 (26 percent versus 12 percent) and an overall 86 percent favorable opinion of the hospitality arena, up from 79 percent last year. Commercial real estate lending activity will be concentrated in two areas as the sector continues to recover in 2005, according to bankers surveyed. Notably, 58 percent foresee construction loan volume strengthening, up from just 38 percent in 2004. And 76 percent anticipate more acquisition financing opportunities, up substantially from 51 percent when surveyed a year ago. Bankers surveyed predict flat demand for mini-perms and value-added loans in 2005 as compared to 2004 levels. Two other clear signs of bullishness emerged from survey responses. For the first time in more than two years, a majority of respondents (51 percent) report bullish sentiments overall on commercial real estate, up from a low of 27 percent two years ago. And 60 percent of bankers anticipate strong loan performance (few or no delinquencies and defaults) during 2005, up from 40 percent just a year ago, suggesting that the number of problem loans is declining. However, tightening credit standards at banks could chill the loan growth that bankers anticipate. One-third of bankers surveyed reported that underwriting standards tightened last year; one-third also expect standards to tighten in 2005 as well. Ten percent indicated that standards eased in 2004, while just five percent expect them to ease in 2005. Bridger's Survey of lenders' commercial real estate perspectives is conducted annually and covers commercial real estate loan officers at banks nationwide. The results of the survey were tallied from responses by 71 different financial institutions nationwide that hold more than $70 billion in commercial real estate loans. For more information, visit www.bridgerfunding.com.
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