U.S. Banks Step Up Commercial Property Lending

March 06, 2012 / Elizabeth Buckley, Commercial Property Analyst

Until recently, Commercial Property Lending has not increased for U.S. banks in the last two years. This lending for commercial property and apartments indicates confidence in the future of the U.S. economy. The $5 billion increase in lending was the first such increase since the first quarter of 2010. It was led by the larger banks according to an agency that follows such trends.

U.S. Banks Step Up Commercial Property Lending

According to the Federal Deposit Insurance Corp. (FDIC), outstanding loan balances increased by $130.1 billion in fourth quarter or 2011. The acting chairman of that government body stated that banks are recovered enough to increase the granting of loans. This will be beneficial to the overall economy.

Three of the largest banks, Wells Fargo & Co., U.S. Bancorp and J.P. Morgan Chase are in a position to grant loans to buy office buildings, warehouses and retail outlet properties. In 1908 regulators let the banks extend loan maturities. The banks were given time to reinforce their finances, thus allowing the value on commercial real estate to rise. They are now able to grant loans once again.

J.P. Morgan Chase, for example, had the most money invested in multifamily loans with New York Community Bancorp, Inc. and Wells Fargo Bank. Default rates are seeing improvement along with all commercial loan rates. Even considering the improvements, $67.6 billion in commercial real estate loans remained as of the fourth quarter. The state of Commercial Property Lending still has a way to go before a full recovery can be established.

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