Office, retail and industrial investors might book that long-awaited vacation to Tahiti this year. They certainly won’t be pouring over commercial real estate offerings – at least based on current lending trends.
The Federal Reserve is reporting that about 65 percent of domestic banks, on net, tightening their lending standards on commercial real estate loans during the last three months.
In January, about 80 percent of senior loan officers at 53 domestic banks and 23 subsidiaries of foreign bank holding companies also reported that they were tightening loans.
Domestic banks had been tightening credit standards on CRE loans for 14 consecutive surveys, although April brought encouraging news: it was the first month since October 2007 that the net proportion of banks reporting such tightening fell below 70 percent.
Demand, however, continued to weaken compared to the prior quarter.
About 65 percent of domestic banks – the highest net percentage reporting since the Federal Reserve began its survey during 1995 – reported weaker demand for CRE loans. In contrast, the net proportion of foreign banks that reported a decrease in demand for CRE loans.