Dive Brief:
- A recent Federal Reserve survey of loan officers found that banks have made commercial real estate lending standards more stringent, according to Reuters.
- The third-quarter study revealed that despite a holding pattern on requirements for general commercial and industrial loans — and even a loosening of some mortgage criteria — land-backed borrowing, including multifamily-related loans, was more difficult.
- Federal Reserve survey respondents included 69 U.S. banks and 21 U.S. offices of foreign banks.
Dive Insight:
The banks in the survey, according to MarketWatch, reported higher demand for commercial and land development loans, but some experts are concerned that years of near-zero interest rates may have contributed to a bubble in the sector.
Overall construction starts were down 2% to $703.7 billion in September, according to Dodge Data & Analytics, but the group's Chief Economist Robert Murray said a robust commercial real estate market has kept starts from falling even more. However, Murray cautioned back in May that tighter lending standards could affect future growth.
Major contractors, as part of the Engineering News-Record's coverage of its Top 400 Contractors list, also reported tougher credit requirements for hotel, retail and multifamily projects. If tighter lending standards persist, they could soon be reflected in industry planning and start figures.
The Federal Reserve has kept interest rates near-zero since the Great Recession and has been wary to bump up the rate amid a slow economic recovery. Murray predicted the Federal Reserve will raise short-term interest rates once this year at its December meeting and twice in 2017.
