CRE loan boom could hurt recovery

An overabundance of loans for commercial real estate could hurt recovery.

While commercial property managers have seen impressive growth industry-wide during recovery, the U.S. Comptroller of the Currency recently warned that lending at too high of a rate for commercial real estate could actually set the country back into another recession.

Thomas Curry, the currency comptroller, explained at a conference that banks and thrifts have approximately $700 billion loaned out for commercial real estate projects, according to CoStar. This totals close to 14 percent of these institutions' total loan power.

"That's a big share of loans, but those numbers don't begin to describe the extent of CRE concentrations for community banks and thrifts, which tend to have much larger relative exposures," Curry said, according to the news source.

Curry added that nearly 40 percent of loan portfolios for banks and thrifts involve commercial real estate, the news source explained.  While this can be good for smaller institutions, having too much of a loan portfolio dependent on commercial real estate can severely cripple their bottom line if something goes wrong. Over the past few years, this has been a factor in the failures of some financial institutions.

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