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After a year spent clearing underperforming loans, U.S. regional banks have reaccelerated commercial real estate lending. Their renewed activity — combined with the continued growth of private debt funds — has created a crowded field chasing a limited pool of high-quality developers and projects.
In fact, bank-issued commercial real estate debt jumped 85% from a year ago, according to BisNow.Â
Houston-based executives at Frost Bank, which held just over $10B in CRE loans as of September, say competition has become more aggressive as lenders target the same established developers.
Frost Sticks to Structure Over Price
Frost Bank is actively competing but remains unwilling to loosen structural requirements on deals. While pricing can change, the bank is holding firm on equity contributions and guarantees. Executives say this discipline is why Frost continued lending while many competitors paused.
Current activity in the Houston market is centered on retail development and select industrial projects.
CRE Lending Returns to Pre-Pandemic Levels
Nationally, bank-originated CRE debt has climbed back to 2019 volumes, according to Newmark’s Q3 capital markets report. Banks remain the largest financing source, accounting for 38% of all CRE lending this year, even as debt funds and securitized lenders expand.
Origination activity across sectors rose 48% year-over-year through the first three quarters, with office, senior housing, and retail leading growth.
Massive Maturities to Drive Further Demand
Roughly $2T in commercial real estate debt matures by 2027, including $573B considered at risk of distress. That pipeline is expected to fuel continued refinancing and sales activity as borrowers seek new capital.
M&A May Reshape Regional Lending
Bank consolidation — including SouthState Corp.’s merger with Independent Financial and Veritex’s planned absorption by Huntington Bank — could shift lending appetites in Texas as newly combined institutions reassess portfolio targets.
