"Senior Loan Officer Opinion Survey on Bank Lending Practices"

Supply and demand conditions for commercial real estate debt are moving back toward equilibrium according to the Federal Reserve’s quarterly Senior Loan Officer Opinion Survey on Bank Lending Practices. In the July survey, just 5.3 percent of the banks surveyed reported tightening standards for commercial real estate loans in the prior three months while 7.0 percent reported that demand for loans had weakened. These were relatively unchanged from the April survey and the lowest levels in about four years. The results disguise a bifurcation in lending activity. Credit for Class A properties in primary, supply-constrained markets is widely available at good terms because banks are once again competing for the best credits. Very low interest rates are spurring investor demand for these relatively safe assets, and lenders are happy to oblige. These are usually the best located buildings in the market with strong tenants and low rollover risk. But credit remains tight for investment properties outside this narrow slice of the market.