Mark Bernardini | Banks are tightening commercial real estate loan standards – Fed

Loan officers at U.S. banks reported tightening their lending standards for commercial real estate loans over the last year, the Federal Reserve said on Monday in a report that could heighten concerns about the outlook for commercial real estate.

Officials at the U.S. central bank, including Boston Fed President Eric Rosengren, have warned that a run-up in commercial real estate prices could amplify any future economic downturn.

On Monday, the Fed said in a quarterly report that standards for overall businesses appeared largely unchanged during the first quarter. But in this latest poll of senior loan officers, the Fed included special questions on commercial real estate lending over the past year.

U.S. banks, in describing why they were tightening standards, cited “a less favorable or more uncertain outlook for CRE property prices, capitalization rates and vacancy rates,” the Fed said in its report.

The Fed is putting a bigger focus this year on commercial real estate in its annual “stress tests” of how well big banks could weather financial turmoil.

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