Fed Beige Book: CRE Loan Demand Declines Due to Costs

Posted May 30, 2024

The Federal Reserve Board released the Beige Book for May indicating moderate growth in the Tenth District and banks anticipate diminishing demand for commercial real estate loans.

The Tenth District, or the Federal Reserve Bank of Kansas City, reported the district expanded moderately due to rising household consumption and growth in professional business service activity. Additionally, hiring activity and job growth also remained modest with just a slight bump over the last month.

Manufacturing contacts continued to report moderate declines in business activity. Manufacturing firms reported they would reduce the number of open positions and reduce hours worked if demand were to decline significantly. Whereas six months ago, firms’ reports showed more optimism in avoiding layoffs.

However, as turnover for businesses decreases, employers said they expect modest job gains over the next six months.

Loan demand was mostly unchanged compared to April. All except commercial real estate loans, which declined due to higher financing costs, according to the Fed.

Commercial real estate activity stabilized over the past month, however, at low levels. Property sales rose moderately throughout the District with slight increases in transaction prices, though contacts noted more self-funded equity was needed to finance deals.

View the full Federal Reserve Board Beige Book May 2024 report, here.