U.S. demand for commercial real estate loans up, but lending standards not loosened: Fed report

TRD NEW YORK /
Jan.January 31, 2012 04:00 PM

While nationwide demand for commercial real estate loans is up, banks are not loosening lending constraints, it would appear, reviewing figures from the Federal Reserve’s quarterly Senior Loan Officer Opinion Survey on Bank Lending Practices report, released yesterday.

A “moderate fraction” of the 56 domestic banks surveyed said that demand for commercial real estate loans had strengthened, on net, over the past three months. However, those banks reported little change in their lending standards, which spells bad news for many owners who will be in need of refinancing this year. U.S. branches of foreign banks reported that they had even tightened their lending standards in some cases, according to the report.

The five- and seven-year commercial real estate loans originated during the boom are beginning to come due in 2012, and many observers have speculated that even borrowers who are not distressed could have trouble refinancing in the current climate. New regulations such as those that demand higher equity ratios, are constraining banks’ lending.

In the past year, some domestic banks reportedly raised their maximum commercial real estate loan size and many domestic banks “trimmed loan rate spreads,” the report says. A few large domestic banks also reported that they had lengthened maximum loan maturities.

Approximately 15 percent of foreign lender respondents said they had increased maximum loan sizes, but a similar percentage also said they had tightened debt service coverage ratios.

Generally, however, the terms of commercial real estate loans were unchanged, the survey indicates. — Guelda Voien


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