Index Shows Worsening CRE Lending Conditions

SAN FRANCISCO-Lending conditions for the commercial real estate industry continued to deteriorate in the third quarter of the year, according to an index maintained by locally based Banc Investment Group with data and support from the US Bureau of Labor Statistics, CB Richard Ellis, Grubb & Ellis and Reis. The BIG CRE Index is calculated using a proprietary algorithm.dropped 10.6% to 63.67 in the third quarter from 71.24 in the second quarter, which itself was an 11.6% decline from the first quarter.

The BIG CRE Index is a forward-looking benchmark of relative strength of CRE market conditions for community banks. Values are derived from third-party providers and data collected by Banc Investment Group’s consulting services group, which provides a loan pricing model used by community banks nationwide. The baseline values reflect the relative condition of each sector compared to the second quarter of 2007.

Conditions in the industrial sector posted the index’s largest decline, falling 21.2%, according to Banc Investment Group. Lending conditions in the retail sector dropped 7.7% and fell 7.1% in the office sector while multifamily fell 9%. The data foretells a difficult lending environment for the fourth quarter of 2009 and into the first quarter of 2010.