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Construction Lending Growth Up But Slowing

Construction loans outstanding backed by major commercial property types continued to expand, growing to $295 billion at the end of the second quarter, according to a report from Foresight Analytics, but the pace of growth is slowing.

Based on an analysis of data from the FDIC, relating to commercial bank and thrift construction lending activity, Oakland, Calif.-based Foresight Analytics reports that construction loans outstanding backed by industrial, retail, office and hotel properties rose 5% in the second quarter of 2008, compared with the first quarter of the year.

However, the pace of growth is slowing. And Foresight Analytics expects the pace to decline further during the course of the year.

“Commercial construction — if it is not quite grinding to a halt — is getting pretty close in the credit crunch. The broader credit crunch is having an impact and making lenders more reticent to make construction loans. Also developers are more cautious as well,” says Matt Anderson, a partner with Foresight Analytics.

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