MARKET ANALYSIS
COMMERCIAL LENDING
Commercial mortgages are also rising as a share of bank’s overall business. Commer- cial and multifamily loans represented 10.3 percent of bank assets as of year-end 2017, up from 9.0 percent in 2012. They repre- sented 18.5 percent of total bank loan books in 2017, up from 17.0 percent in 2012. Because property values are rising much faster than the economy – val- ues are roughly 25 percent above the 2007 peak, per various indexes – bank mortgage holdings are growing as a share of GDP. As of Q42017, commercial and multifamily loans represented 10.3 per- cent of U.S. GDP, up from 8.4 percent in 2011 and 7.9 percent in 2007. The growth reflects the extent to which commercial property values have risen, in large part due to strong capital markets forces. Whether the growth in commercial mortgages indicates a bubble is an open question. Certainly, growth of the last few years is unsustainable, and there was a similar rise in outstanding balances before the global financial crisis. However, there are few signs that banks are engaging in the highly leveraged lending practices that led to the bubble a decade ago. REGIONAL/LOCAL BANKS LEAD IN GROWTH To understand how growth differed by type of bank institution, Yardi Matrix broke down bank lending statistics into four categories based on asset size: banks with $1 trillion or more (of which there currently are four), banks with $100 billion to $999 billion (there are 24), banks with $10 billion to $99.9 billion (there are 78) and banks with assets of less than $10 billion (there are 5,187). Bank lending statistics in this report come from BankRegData.com. While all categories of banks have increased lending, data shows that the amount of growth varies. The portfolios of regional and local banks are increas- ing at a faster rate than the relatively few national and money-center banks. That
Regional/Local Banks Eating More of the Commercial Mortgage Pie WHEN IS ENOUGH, ENOUGH?
by Paul Fiorilla
T
he post-financial crisis expansion has been
a heady time for banks in commercial real estate. As of year-end 2017, banks held $1.8 trillion of commercial and multifamily mortgages, up nearly $500 billion (37.4 percent) since the recovery began in earnest in 2012 and 50 percent more than the $1.2 trillion banks held 10 years ago at the height of the last lending boom.
holds true for both the most recent year and over the course of the recovery. In 2017, bank commercial and mul- tifamily mortgage portfolios rose by $88.2 billion, and $63.8 billion – almost
three-quarters – came from banks in the $10 billion to $99.9 billion category. Year- over-year banks in that category increased mortgage holdings by 15.7 percent, compared to 0.6 percent for the $1 trillion
48 | think realty magazine :: october 2018
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