Commercial real-estate loans are up 3.3% from last year according to research firm SNL Financial. In fact, banks across the country had $991.2 billion in total commercial real-estate loans as of June 30th. This includes lending developers and owners capital for properties, from office buildings to shopping centers, warehouses and apartments, thanks to rising real estate values and improved credit quality.
According to the Wall Street Journal, J.P. Morgan Chase reported that its outstanding commercial-real-estate loans rose to $61.5 billion in the third quarter, a 12% increase from a year earlier. “The commercial real-estate business continues to grow strongly,” said J.P. Morgan Chief Financial Officer Marianne Lake, with notes increasing “every month for the last 13 months.” More figures will be released this week from other financial institutions such as Citibank, Bank of America, U.S. Bancorp and PNC Financial Services Group.
In an article in the WSJ, developers cited seeing more banks willing to bid for loans for projects in the past two years. This growth and optimism are an about-face from the slump caused when banks were slammed during the financial crisis as construction loans made during the real-estate boom began to sour. According to SNL, total commercial real-estate loans outstanding by U.S. banks had declined to $950 billion in 2011, representing a 25% plunge from 2008.
The lending rebound, according to analysts, is being fueled primarily by apartment projects. In fact, production of new multifamily properties increased in the second quarter, according to a National Association of Home Builders index, which rose nine points from the first quarter to 61 on a 100-point scale. It was the highest level reached since the index was established in 2003. E.J. Burke, executive vice president of KeyBank Real Estate Capital for Cleveland-based estimated that eight out of every 10 potential commercial real-estate deals the regional bank sees are in the multifamily-housing sector.
Even in areas hit hard by the housing areas like Florida improving economic conditions have led to more opportunities to lend. John Kanas, a longtime banker who took over failed lender BankUnited Inc. in 2009, said a “firming up of property values” has helped spur recovery, especially in south Florida. In fact, Florida banks earned $296 million in the second quarter of 2013 with one of the strongest areas for growth being commercial real estate. This indicates that the market, in general, is improving and that there is an increase in commercial real estate confidence.
This is not only good for property developers and owners but also for insurance agents and brokers looking to expand their footprint in the commercial property arena with a portfolio of products that addresses the various exposures each individual class within the sector faces. This includes property coverage with enough capacity to properly insure the locations and structures. It also means having access to flood and earthquake insurance and the ability to write coastal properties.
IPOA specializes in providing insurance solutions for properties across the country. We have both admitted and non-admitted markets and a program division – NationalPropertyPro – that addresses large property values across a wide range of classes, including condominiums, hotels, offices, restaurants, retail and more. Please give us a call at 877.653-IPOA (4762) to find out more about our programs.
Sources: WSJ, SNL, National Association of Home Builders