Beige Book: CRE Lending Tightens as Data Centers Boom

While housing weakened, the Fed's October Beige Book described commercial real estate as stable overall, though higher rates are starting to show up in lending and sales.

 

What did the districts say?

• San Francisco: CRE conditions were steady on net. Industrial demand was solid across much of the district and improved in Southern California, with rents flat to slightly higher. Some lenders tightened terms for certain commercial real estate projects

• Boston: activity was roughly stable, with industrial leasing, rents and vacancy flat. Commercial foreclosures stayed limited despite elevated distress among urban office buildings. Contacts cited downside risks from political uncertainty and rising long-term interest rates

• Chicago: megaprojects were crowding out capacity for other projects

• Minneapolis: construction increased modestly and commercial real estate was flat

Where is construction concentrated?

San Francisco's report says construction activity is stable overall, but concentrated in data centers, government and infrastructure projects, and semiconductor factories and warehouses.

What about lending?

Coverage of the report notes that commercial property sales slowed as rising rates reduced buyer appetite, and that banks reported tighter standards for commercial mortgages.

How does it fit with other data?

It lines up with the CRE Finance Council's sentiment survey, which hit its lowest level since 2023, and with Trepp's price index showing flat prices in Q2.