Barely five years after the industry's near collapse under the weight of billions of dollars of bad property loans, some experts fear the seeds of the next commercial real estate crisis already have been sown.

A survey of major banks by KPMG Peat Marwick concludes that risky real estate lending is on the rise - and that, despite the harsh lessons of the recent past, many banks have failed to adopt safeguards against loss.

What's more, the report concludes that competition is dragging loan prices too low to cover banks' risk - a hallmark of the previous disaster.

"We are again hearing the slogan of the late 1980s, 'There's too much capital chasing too little product,'" said Carl Kane, national director of real estate consulting at KPMG. "There are signs of imbalance in real estate finance that equate to a red flag."

The accounting and consulting firm used data provided by American Banker to identify the major real estate lenders among U.S. banks. The newspaper also helped prepare a series of questions that KPMG posed to real estate specialists at the U.S. banks and several international institutions that also are active in the market.

A total of 36 institutions responded, 28% of them identifying themselves as "global," 25% as "national/superregional," and 47% as "regional."

The major finding: Banks are clearly back in the real estate business.

"Real estate volume has increased and is expected to continue to do so," Mr. Kane said in the report. "Traditional portfolio products have increased the most in the last year and money is available for virtually all property types, albeit from different sources for different products."

The report's findings are consistent with data from the Federal banking regulators, which show steady increases in commercial mortgages on the books of banks.

"Commercial real estate is perceived as fair-haired once again," one survey respondent wrote.

Construction loans - which caused problems for many banks when insurance companies pulled back from permanent financing for completed projects - are on the rise again, according to the survey.

Thirty-one percent of all respondents said their banks have increased construction loan activity in the past 12 months. Among national/superregional banks, a rise in construction loans was reported by 78% of respondents.

After a several-year hiatus, the "mini-perm" loan is making a comeback or sorts.

In this type of loan, the lender takes additional fees - and additional risk - by extending credit to a project for several years beyond the typical three-year period of a construction loan.

Though global institutions said they were reducing their involvement in mini-perm lending, the loans were said to be on the rise at 44% of national/superregional banks and at 35% of the regional banks.

Two-thirds of the respondents said they expected further increases in real estate transaction volume.

Bankers predicted lending will increase for every property type, with retirement housing the hottest category.

Significantly, 28% said they expect increased involvement in office activity. Only 6% said they were either reducing involvement or leaving the office business. This was a real estate category that produced a mountain of bad loans in the late 1980s, when construction outstripped demand in most major metropolitan areas.

The survey comes amid a widely heralded revival in many real estate markets. Indeed, 83% of respondents said "market fundamentals" were important or very important in influencing recent changes in real estate strategy. (Only 33% listed recently incurred real estate losses as important or very important to their strategy.)

The recovery is especially pronounced in the Southeast, said Lloyd Lynford, president of the Reis Report.

Orlando, Raleigh, N.C., Atlanta, and Charlotte, N.C., are among the growing real estate markets, said Mr. Lynford, whose New York-based firm provides data on vacancy rates, rental rates, and other market variables to a number of large banks.

"You're only beginning to see speculative construction in Boston, northern New Jersey, and Washington, D.C.," he added, noting that the improvements in the supply and demand for real estate space have been most pronounced in suburban office markets.

But Mr. Lynford said bankers may be making a fundamental - and all too familiar - mistake if they are counting on a booming real estate market to keep them out of trouble.

Mr. Lynford said price of real estate space has been rising faster than is warranted by the improvement in vacancy rates.

In Chicago, for example, the asking rate for office space has risen to more than $120 a foot, from about $50, since early 1995, Mr. Lynford said. In the same period, the vacancy rate has slipped only one or two percentage points to between 15% and 16%.

How can this be? Mr. Lynford said it appears a few pricey transactions have driven appraisals higher for the entire market. "The answer is, people are once again factoring in growth," Mr. Lynford declared. "Gambling has come to the casino again."

However, Mr. Lynford and bankers said there are some basic differences in the market that may protect the industry from another meltdown.

Matthew Galligan, managing director of commercial real estate at Fleet Financial Group, noted an increase in equity investment in real estate and a growing market for commercial real estate securities.

Real estate investment trusts, or REITS, established since the real estate bust have flooded the market with $75 billion of new equity, giving lenders much more protection from losses, Mr. Galligan said.

The growing securitization market gives institutions an alternative to holding assets on their books, he said, enabling lenders to sell assets to reduce exposure to a particular region or property type or to reduce exposure to real estate in general.

Mr. Galligan said securitization has helped improve banks' underwriting discipline. When a lender anticipates securitization of loans, he said, "there's a perception that the loan committees of last resort are the rating agencies. Unless you have things in place to fall into the parameters that they're willing to bless with a rating, then you're not going to gain the liquidity you need to get the benefits."

Nevertheless, only 25% of the banks in the KPMG survey said their companies are substantially or very substantially involved in the securitization process. The survey found 40% originate loans for securitization.

The survey also revealed a spotty record when it comes to initiating risk controls. For instance, exactly half the respondents said their companies have already initiated "operating controls/organizational review" of their real estate units, and another 11.1% plan to undertake reviews in the next 12 months.

Profitability-and-return analysis has been undertaken by 52.78%, and another 22.22% said they plan to perform that analysis in the next 12 months.

Less than 14% of the respondents "outsource" - or use outside firms - to help control real estate risk, the survey showed.

The survey noted an undercurrent of concern among bankers about the direction of underwriting standards, with 44% saying underwriting criteria became less restrictive in the past year. Only 19.44% said it was more restrictive. A whopping 61.1% of respondents said underwriting criteria will become less restrictive or significantly less restrictive for the remainder of the 1990s.

Even if a meltdown is not in the cards, the survey indicated that as the real estate cycle matures, profits could shrink.

"Banks of all sizes agree that any loosening of underwriting standards is attributable to competition to win business and the search for yield," Mr. Kane wrote.

"This creates a classic conundrum - the pursuit of higher yields impels many competitors to compress the yields to capture business, thereby undermining a principal reason for being in the business in the first place."

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