NAR and industry partners encourage policies to support market recovery and protect against looming debt maturation.
Low angle view of looming multistory glass window commercial office buildings

The National Association of REALTORS® and its affiliated organizations are uniting to give elected officials a clear picture of how commercial real estate is faring in what—for many owners—is an increasingly stressful environment.

On behalf of NAR and commercial affiliates The CCIM Institute, the Institute of Real Estate Management, and the Society of Industrial and Office REALTORS®, NAR President Kevin Sears sent a letter to a congressional panel examining the health of commercial real estate markets. In the letter to the U.S. House Subcommittee on Health Care and Financial Services, Sears called attention to long-term negative impacts on commercial businesses, including the shift to e-commerce, changing work patterns and the looming debt challenge.

A Trepp analysis of Federal Reserve data last year showed that an estimated $2.81 trillion in commercial loans was expected to mature between 2023 and 2028. Much of that debt was originated under vastly different economic conditions including higher occupancy and lower interest rates. “As a result, while many commercial property owners and occupants are still attempting to recover from the economic damage done by COVID and adapt to new consumer trends, they may be facing larger loan payments to their lenders,” the letter says.

NAR and its affiliates are calling on financial regulators to offer flexibility to commercial real estate lenders, often small or community banks, and establish a program (following precedents from 2009, 2010, 2020 and 2022) that would encourage financial institutions to work prudently with borrowers on troubled debt restructuring.

At the same time, NAR says, it’s important that unnecessary barriers to equity investment be lowered and that taxes on risk-taking not be increased.

“The country’s financial regulators and lawmakers should be considering prudent, but flexible policies that assist this critical sector in its recovery, not arbitrary requirements that will only serve to further reduce values and leave both lenders and commercial real estate borrowers in danger,” the letter states.

Sears pointed out that commercial real estate in the U.S. “contributes an estimated $2.3 trillion to the economy (or 9% of the total U.S. GDP), supports over 15 million jobs and provides $559 billion in property taxes to local governments. ... We look forward to working with you to develop solutions to protect this critical sector of the U.S. economy.”


Banks Continue to Tighten Loan Standards

Federal Reserve survey points to slight improvement in demand for commercial real estate loans. 

U.S. banks continued to tighten credit standards on commercial and industrial loans in the first quarter of 2024, according to a Federal Reserve survey of lending officers published in May.

The net share of banks that tightened standards for mid-sized and large businesses (those with annual sales of $50 million or more) rose to 15.6% from 14.5% in the fourth quarter, the Fed reported, citing weakening demand for industrial loans and a decline in household loan demand, with demand for auto loans at its weakest in a year.

For commercial real estate loans of all types, however, signs pointed to some improvement in credit supply and demand. The share of banks tightening standards for these loans shrank to the lowest in two years, according to a Reuters article published May 6. Foreign banks reported an overall rise in demand for commercial real estate loans in the first quarter.

The figures in the report, known as the Senior Loan Officer Opinion Survey, are calculated as net percentages, or the shares of banks reporting tighter conditions or stronger demand minus the proportion of banks reporting easier standards or weaker demand.

The survey’s most cited reasons for tightening commercial credit policies were less favorable or more uncertain outlooks for market rents and high vacancy rates and property prices.

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