Banks cited a range of factors for these changes, including a less favorable outlook for commercial rents, vacancy rates, property prices, and the overall economic landscape. Rising interest rates decreased customer acquisition and development activity, and a less optimistic outlook for rental demand was also identified as a reason for weaker demand.
The tightening of lending standards and terms was evident in various aspects of CRE lending, including wider interest rate spreads, reduced maximum loan sizes, lower loan-to-value ratios, increased debt service coverage ratios, and shorter interest-only payment periods.
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