US banks are set to loosen their commercial real estate (CRE) lending standards as loan demand continues to rise, a survey by the Federal Reserve has revealed.
The Federal Reserve’s Senior Loan Officer Opinion Survey (SLOOS) showed that the country’s banks are loosening their lending standards for the first time since the second quarter of 2022. Meanwhile, loan demand improved for the second consecutive quarter after declining in the first quarter of 2022.
However, the survey revealed that lending standards for corporate (C&I) loans continue to tighten, suggesting banks may be shifting their focus back to CRE.
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“The latest SLOOS results suggest that CRE credit dynamics are shifting meaningfully in favour of borrowers. After a prolonged period of tightening, banks are beginning to ease standards, loan demand is strengthening, and forward-looking expectations for 2026 are increasingly optimistic,” said Rich Hill, global head of real estate research and strategy at Principal Asset Management.
According to the survey, roughly 93 per cent of banks expect standards to ease or remain stable, and 100 per cent anticipate steady or improving loan demand in 2026.
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The easing is driven by improved credit quality in existing portfolios, a stronger economic outlook and increased competition among lenders, according to the survey.
“If these trends hold, they could create durable tailwinds for CRE valuations, supporting continued price growth as the year unfolds,” Hill added.
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The CRE market has had a challenging few years but there are signs of a cautious recovery, according to industry participants. Read our real estate feature on page 16 of the February issue of Alternative Credit Investor, out now.
