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American banks shying away from commercial property loans

On Behalf of | Oct 12, 2016 | Commercial Real Estate |

California commercial property developers may have noticed an increasing paucity in the loans issued by American banks. An unsettled economic environment and fears of incipient regulation have caused many lenders to withdraw from the commercial property marketplace. This leaves developers with fewer options for the loans they need for their business.

Government agencies like the FDIC have been issuing warnings to banks for some time. The government has alerted them that they must strengthen the terms of their loans or face investigations and other regulatory actions. This has provoked caution among the American financial sector, and small banks are choosing to limit their exposure by refusing to issue new loans and selling off the ones they already have. The larger banks have been following suit as well, as they no longer expect to be able to sell their loans to the smaller banks.

This is leading to an expansion in foreign lending to fill the gap. For example, both Deutsche Bank and the Bank of China have put more than $1.5 billion into commercial property loans in the United States. In total, foreign banks have about $51.8 billion in the American commercial real estate market, which represents an increase of 56 percent in just one year.

The legal aspects of commercial real estate development have the potential to be complex. An attorney’s guidance can be helpful to those who wish to explore possibilities in commercial real estate, as they may be able to examine all contracts to make sure they are suitable and advocate for their client in any negotiations that may occur.

Article Source Web Link: The Real Deal, “Small banks shrinking away from commercial real estate”, Oct. 4, 2016