Finding a Floor in Commercial Real Estate

Clouds remain for commercial property lenders-banks that do a lot of business in the sector frequently cite intense competition and shrinking yields. But after years of decline, overall volume, at least, appears to be leveling out.

A $330 billion contraction in construction loans represents about half the drop in total bank loans from a peak in mid-2008 through early 2011.

Total loans have generally grown since then, while construction loans have continued to shrink. The bleeding has eased along with chargeoffs, though levels of bad debt remain high.

Meanwhile, loans backed by commercial properties, including multifamily residential buildings, ticked up in the second and third quarters after having generally stagnated since the official end of the recession.

The table that can be accessed by clicking on the image to the left shows banks with the highest ratios of commercial real estate loans to assets among banks that had at least $1 billion of such loans at Sept. 30.

Among this group of specialists, commercial property loans increased a median 5 percent from the year prior. Construction loans fell by a median 19 percent, while loans against multifamily properties increased by a median 14 percent.

New York Community Bancorp, a large multifamily lender, has downplayed the threat from new competitors. "There is no question that there are some additional players in that market," CEO Joseph Ficalora told investors in October.

But he noted that with the collapse of securitization, "there is not anything near as much competition in the marketplace as existed in 2006, 2007, 2008."