August 4th, 2011, By Dana Haugh
Commercial lending has rebounded quite successfully this quarter, showing an increase tantamount only to the second quarter of 2008. A good sign for those of us in the CRE market, as it shows a steady and growing industry ready to move back into the game. The index recorded a 107% jump from last year’s statistics, likely as a result of the lessening fear of loan default and slowly recovering economy.
But this shift might only be temporary considering the entire nation almost defaulted on their loans just a few days ago. The question is whether or not the nation’s current economic situation will affect lender willingness to invest in new ventures. Major cities have, of course, been leading the pack in revitalizing the commercial real estate market and their suburbs have slowly began to follow the trend. I would hate to see all that hard-work and newly restored faith fly out the window over a matter of political disagreement. Slow job growth coupled with other global debt and our struggling financial situation certainly hasn’t left the best taste in lenders’ mouths.
Another minor speed bump came in the form of Standard & Poor’s acknowledgement of a faulty formula used for rating new loans. The CMBS sector felt the immediate effect of this disclosure as timid investors strayed away from new bank loans. Because of that, “it drives up the cost of [the bank’s] loans, which means they are making fewer loans generally.”
Regardless, a $1 trillion debt in commercial real estate is expected to “mature” between 2011 and 2013 and any decline in lending will affect the CRE market.
All information gathered from Wall Street Journal