Economic growth and American businesses’ demand for expansion will lead to business lending growth “at a near double digit annual rate” over the next couple of years, according to a report released on Friday by the American Bankers Association’s economic advisory committee of bank chief economists. Furthermore, the even better news is that, Arizona is and will continue to be leading the country in bank lending.
The Banker’s Association report says that banks are already seeing increased demand from businesses. In the past year alone, loans on US banks books grew by $93.4, a 6% increase in the past year. Clearly, businesses are at least thinking about investing in new buildings and equipment. This demand is being met by banks in a much improved position to meet demand, given that default rates on old loans are bottoming out.
Although the news on a national basis is very good; the news locally is even better. Case in point: With a remarkable 50% increase in CRE bank loans outstanding, Arizona experienced more growth than any other state in that category in the last 12 months. Arizona also led the country in construction and development loans as well as owner occupied CRE loans with a 43% and 38% increase respectively. It is interesting to note that all of the increase in CRE owner occupied loans came from large corporations; but, loans to small business is expected to soon follow suit.
Overall, the ABA’s bank economists’ forecast expects 3% economic growth for the remainder of 2014. They also expect the Federal Reserve to continue tapering its bond purchases and to see increased rates in the second half 0f 2015. With business lending demand increasing and banks being in a position to meet the demand, we should see a decent continuation of the improving conditions (continued positive absorption, lower vacancy rates, rising property values and rents, lower rent concessions, etc) in CRE in the near future.
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