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
For more information, visit www.bridgerfunding.com.