Photographer: Emile Wamsteker/Bloomberg *** Local Caption *** Chris Toepfer

One Big Small Bank Reason to Worry About U.S. Commercial Real Estate

Regional lenders may face a pullback.

Banks burned by soured home loans in the aftermath of the housing bust and subsequent financial crisis found a quick replacement: mortgages secured by commercial properties ranging from malls to offices.

In the years since 2008, U.S. lenders have opened the commercial real estate (CRE) credit spigots, lending money underpinned by properties including hotels, multifamily rental units, and industrial compounds. Banks' total share of the CRE market has subsequently jumped to a record 52 percent of loan originations compared to just 35 percent as recently as two years ago, according to Morgan Stanley data.

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