After tentatively testing the water in 2011, banks increased their overall lending for commercial real estate in 2012 with total CRE loan balances outstanding at year-end up 3% year-over-year. Investment property loans outstanding showed the biggest gain, ending 2012 up 11% from 2011. And multifamily loans outstanding were up 7% year-over-year.
Banks also continued to shrink their loan exposure in areas that caused the biggest problems during the Great Recession. Construction and development loans outstanding ended down 16% year-over-year.
Still, a great deal of disparity exists between which banks are lending again and which borrowers and markets are benefiting.
“Larger institutions have historically been significantly under-allocated to CRE relative to the banking universe,” said Matthew Seminerio, a financial analyst for CoStar Group’s Property and Portfolio Research (PPR). “The largest banks (those with more than $50 billion in assets) are down 0.4% year-over-year, while banks with $10 billion to $50 billion in assets are up 7%. Smaller institutions are down even more. Banks with $1 billion to $10 billion were down 0.3%, and those with less than $1 billion, down 4.5%.”
“However, the larger banks are better positioned from a balance sheet perspective, and thus have also been able to take more writedowns,” Seminerio said. “For example, if you remove the impact of
construction loans, the more than $50 billion change is actually up 3.6%, vs. 9.6%, 1.6%, and -3.1% for the other three categories, respectively.”
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