Office lending for banks has been one of the better-performing sectors of commercial real estate (CRE) for banks for some time. Even during the pandemic, the credit on office loans is doing surprisingly well. The question arises, what happens in the future? Will it be business as usual post-pandemic? Will companies take more space to provide for social distancing, 25% of the space as they go mainly to remote workers or 50% of the space to handle a hybrid remote work culture?
Tag: Credit Risk
It may seem counter-intuitive, but many banks are loosening CRE underwriting standards instead of continuing to tighten them. With a new presidential administration, it is likely that we will face more stringent pandemic mitigations in the near future. While this is likely good for public health, it increases the short-term risk for commercial real estate (CRE). Offsetting this risk is the possibility of a vaccine and therapeutics.
In the last five years, one of the new disciplines in banking that has emerged is the combination of machine learning and satellite imagery to gather bank intelligence on fraud, credit, and bank marketing. While this sounds daunting, in this article, we will show you some relatively simple applications of both artificial intelligence (A.I.) and satellite (sat) imagery to improve bank performance. In the last several years, bankers have learned that they have access to inexpensive imagery that is often free.
The Covid-19 pandemic has decimated the US economy, and the recovery may take longer than initially suspected. However, currently, community banks have an opportunity to identify and win or retain longer-term, credit-worthy relationships at better credit spreads. There are also substantial challenges facing the entire banking industry.
It is around this time before a presidential election that bankers start to ponder how the results of the election will affect credit, interest rates, and the general business environment. The stock and the acceptable answer is that presidents get too much credit when the economy does well and too much blame when it slumps. The complex and intertwined US capitalist economy goes through boom-and-bust cycles independent of any president’s actions.
We sent out a survey to several thousand community bankers across the country to understand bankers’ concerns, challenges, and opportunities in the current business environment. We feel that organizing an exchange of ideas and sharing of strategies is beneficial to many bankers. We also offered resources (videos, white papers, policies, marketing material, online proposal generators, and calculators) to help bankers obtain information based on their specific survey responses. The survey only took five minutes and consisted of five questions.
What is with all the waving we do at the end of Zoom calls? Should we start waving as we back out of the room for in-person meetings in the future? By the same token, many banks are baffled by what to do with the Main Street Lending Program (MSLP), as this is not something we would do in normal times. Yet, we found ourselves both participating and waiving at the end of those MSLP Zoom calls. No matter if your bank is going to participate in MSLP or not, understanding the risk involved is a master class in loan structuring and credit.
While several commercial real estate (CRE) sectors are showing signs of stress, the industrial sector is one of the few bank credit lines that are improving. Companies gained confidence at the end of the second quarter and started to lease more space. As such, weekly leasing activity jumped back to pre-Covid-19 levels after hitting a low in mid-April. In this article, we take a quick look at national CRE industrial sector economics and explain why banks may want to consider reallocating more capital to this area.
One of the most underappreciated commercial real estate trends in banking is the remarkable stability of multifamily rents during this pandemic. As of last week, according to the National Multifamily Housing Council (NMHC), 77.4% of renters in an 11.4 million sample size of professionally managed apartment complexes were making their rent payment which compares to 79.7% during the same time as last year and an average of about 82% for the year (summer delinquencies are usually higher).
While it is too soon to get the data on bank commercial real estate (CRE) portfolio delinquencies and forbearances, we take our benchmarks from the commercial mortgage-backed securities market as of May 14th. As any commercial banker can tell you, hospitality and retail remain under the most pressure, jumping up more than 5x and 3x, respectively. Office delinquencies are up 71%, month-over-month, industrial properties remain relatively unchanged while Other (self-storage, specialty, etc.) is up 3.5x.