Big Banks Are Wading Back Into Commercial Real-Estate Lending -- WSJ

By Ben Glickman

Big banks are on the hunt to grow their loan books and are turning back to an area they had shunned not that long ago.

Just a few years ago, banks couldn't get away from commercial real-estate loans fast enough, fearing potential losses as office vacancy rates remained elevated after the pandemic.

Now, they are wading back in with a focus on big growth areas like multifamily housing and industrial real estate, which is being fueled by a boom in big data-center projects. They are doing so with tighter lending standards, they say, while still working through some troubled loans stemming from continued distress in some office markets.

Bank of America and U.S. Bancorp's commercial real-estate loan balances were each up over 8% in the second quarter from a year ago. Truist Financial's loans were up by about 25%, and PNC Financial Services Group's were up 15%.

Overall, commercial real-estate mortgage loan originations in the first quarter were up more than 50% from a year earlier, according to a survey by the Mortgage Bankers Association, driven in part by an 80% increase in loans from deposit-taking institutions.

"There's kind of an awakening that it's probably safe to go back into the water," said Citizens Financial Group Chief Executive Bruce Van Saun. "We need earning assets, and we can find some attractive earning assets."

Citizens has said it plans to do more real-estate lending tied to specific areas such as data centers, though its pullback in offices is causing its overall commercial real-estate loan balance to fall.

After office buildings failed to fill back up in the years following the pandemic, investors and analysts had been bracing for a wave of defaults in commercial real-estate loans. Banks set aside more money for potential losses and scrutinized their books for any signs that distress could be bubbling up. Higher interest rates and rising maintenance costs also darkened the picture. Valuations sank.

Now banks have worked through the most problematic loans and are seeing lower delinquencies in their real-estate portfolios. At some lenders, the portion of commercial real-estate loans in distress in the second quarter dropped sharply, though overall delinquencies across the sector remain relatively high.

Big lenders for years had to hold significant reserves against potential losses in their commercial real-estate portfolios, which left them less space on their balance sheets to make new loans, said Jade Rahmani, an analyst at Keefe, Bruyette & Woods.

"They feel they've ringfenced the losses," said Rahmani. Many of the more problematic loans have been extended or modified.

Commercial real-estate loans at U.S. banks totaled nearly $3 trillion in June, up about 3% from a year earlier, according to data from the Federal Reserve.

With profits from their core lending businesses lackluster, in part because of hot competition for consumer deposits, banks are also under pressure to find ways to grow their loan books.

Another factor in the return to growth: the vast build-out of data centers across the country. Big banks have benefited in dealmaking and corporate lending from the artificial-intelligence boom, and real-estate developers tied to the projects also need mortgages and construction loans.

Bankers are still being cautious, and commercial real estate remains a small portion of larger banks' loan balances. Bank OZK, an Arkansas-based lender where commercial real estate had historically made up around two-thirds of its loans, has been pushing to diversify in recent quarters. In its second-quarter earnings report this week, the bank said origination volumes were subdued after it saw significant competition for real-estate debt deals.

Still, executives are optimistic about the sector.

"We along with many others had this downdraft in commercial real-estate loans, and now it's just starting to pick up. It's good to see," said John Stern, chief financial officer of U.S. Bancorp.

Write to Ben Glickman at ben.glickman@wsj.com

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July 23, 2026 20:00 ET (00:00 GMT)