ABA Survey: Despite Regulation, CRE Lending Continues to Thrive

Commercial real estate continues to boom, with eight in 10 banks saying they plan to increase concentrations in CRE in 2016, according to the first-ever ABA Commercial Real Estate Survey released today at ABA’s Real Estate Lending Conference in San Antonio. Of the banks surveyed, 19 percent had construction concentrations of more than 100 percent, and 9 percent had CRE concentrations of more than 300 percent. Multifamily, office and retail were the most active asset classes, accounting for 62 percent of banks’ total CRE portfolios, on average.

Half of the survey respondents currently have outstanding loans classified as high-volatility CRE — which has taken on extra regulatory scrutiny — and nearly a third said they have increased pricing to reflect the additional capital cost from the HVCRE classification. Four in 10 said they expected that regulatory guidance on HVCRE would reduce available credit across certain sectors of CRE lending, while an additional quarter of respondents said they anticipate a reduction across all CRE sectors.

Bankers cited competition from other banks as their biggest challenge when it came to CRE lending, followed at some distance by regulatory requirements and nonbank competitors. Looking ahead to 2016, bankers said they were most concerned about regulatory burden, low capitalization rates, increasing interest rates, and competition, as well as economic and market conditions.