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Commercial Lending Scrutiny Is Causing Small Lenders Concern

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Regulators are increasing their scrutiny on commercial real estate lending standards, causing many small lenders to back away from the market to avoid the microscope

Small banks are unwinding and selling off loans, and brokers say it’s becoming harder to find lenders for commercial property deals, the New York Times reports. Deals involving construction and redevelopment are struggling the most, since lenders consider them riskier bets as those properties do not immediately generate income.

Jones Lang LaSalle director Aaron Appel says there is less competition for $5M to $10M commercial property deals, and instead of lending to commercial real estate many banks have shifted focus towards local business and acquiring smaller banks. [NYT]