Banks Give New Focus to Commercial Real Estate Lending

Commercial real estate lending is being viewed by banks as a major target of business activity, according to a new survey conducted by the American Bankers Association (ABA).

The trade group found 82 percent of surveyed banks planned to increase their capital concentration in commercial real estate, nine percent of the surveyed banks claiming to already have 300 percent or more capital concentration in this lending sector and 19 percent reporting 100 percent or more capital concentration in construction lending. Among sectors, multifamily, office and retail were the most sought-after types of lending.

Furthermore, 35 percent of respondents said their commercial real estate lending demand was higher than one year ago. However, nearly two-thirds of respondent banks worried that regulatory guidance on commercial real estate risk management would cause a “measureable reduction” in credit availability.

“The CRE market is seeing both an increase in demand and management decisions to grow CRE exposures,” said Robert Davis, ABA’s executive vice president, mortgage markets, financial management and public policy. “As the market expands, it’s not surprising that regulators are focusing on more guidance and oversight.”