The State of Banks and CRE Lending
Terrydale Capital
Aug 21, 2024 6 Min read
Despite a strong start and subsequent outlook, 2024 has been a tumultuous year in the commercial real estate market with many ups and downs as a result of some financial roadblocks spilling over from the prior year. With mounting distress, declining property valuations and many other market difficulties, lending avenues have begun to show the wear and tear of the current market. Banks, as of late, have been making headlines as their struggles come to the forefront.
Banks and The 2024 Lending Climate
While banks started the year with a bang as they attempted to recover from 2023’s paltry lending environment, they have begun to show the marks of a difficult market. While they are still aggressive for high performing properties, in some other asset classes, they have found themselves overextended.
Due to rising distress and other under-performing loans, many of the large institutional banks have been feeling the pressure of their commercial real estate loans. However, despite the big banks feeling this increased pressure, smaller community and regional banks remain steady in their lending parameters having not overextended as much as their larger counterparts.
Where Banks Are Shifting
As of late, banks are holding a premium on occupancy rates when assessing commercial real estate deals, which has led to them being more favorable to certain assets moving forward.
Banks have grown an appetite towards retail assets - specifically single tenant assets. Single tenant assets are viewed as “safer” with long-term leases being more secure compared to multi-tenant assets. Compared to other assets, they are considered “easy to lend on.”
Banks have also become more favorable towards industrial assets such as warehouses, manufactured facilities and self-storage facilities as they are all considered safer investments for both investors and banks with lower rates of loan failure compared to other assets.
With some favor opening up to certain assets, this does not mean that banks are loosening their already stringent underwriting procedures and requirements.
In addition, given the emphasis banks have been putting on depository relationships with borrowers, this makes many banks very reluctant or refusing to perform cash-out refinances in order to maintain their lending relationships and resist the loss of volume. Some banks, such as Wells Fargo, are in the process of shedding some of their commercial real estate loans through sale to other banks in order to protect their integrity and recuperate some of the financial dings they have taken from underperforming loans.
In Conclusion
It remains to be seen how banks will continue to react to the volatile climate of commercial real estate. While smaller banks have been spared thus far the weight of commercial real estate compared to larger banks - this does not mean that they will all remain immune to this. We can anticipate other large banks that have incurred losses from underperforming CRE loans to pivot to selling some of their commercial loan portfolios to other banks in order to recover. However, not all is doom and gloom in the world of commercial lending. Many alternative lending avenues have risen to the top to fill the void the big banks are leaving.
At Terrydale Capital, we boast widespread connections to the nations top lending resources offering a variety of alternative lending options for investors. Contact us today!
Partner With Terrydale Capital for Your Debt Financing Needs
When it comes to debt financing, understanding the right timing, process, and options is crucial. At Terrydale Capital, we provide a comprehensive range of commercial loan solutions tailored to meet your business's unique needs.
Success!
Product has been created successfully!
Headquartered in Dallas, Texas, Terrydale Capital is a leader in commercial real estate financing. We have close relationships with the nation’s top banks, lenders & family offices allowing us to provide the most competitive financing solutions in the market.
