Commercial Real Estate Loan In Texas
Insured institutions based in Texas are increasing commercial real estate (CRE) loan exposures.
In the first quarter 2006, a little more than a quarter (27 percent) of insured institutions headquartered in Texas reported CRE loan exposure greater than 300 percent of Tier 1 capital (up from 8 percent a decade ago).6 CRE fundamentals have improved in many markets; however, areas of concern exist.
More than one-quarter of office space in the Dallas central business district (CBD) was vacant as of first quarter 2006, and the metro area’s overall office vacancy rate remained the highest in the nation. Class A space, previously a bright spot in the CBD, is under pressure from corporate relocations and consolidations.7 In addition, half the Dallas office submarkets report vacancy rates that are among the worst vacancy rates in the nation.8
On a more positive note, Texas industrial property markets should benefit from strengthening global trade, particularly with Central and South America. Ranking among the top industrial distribution centers in the United States, the Houston, Dallas, and Fort Worth metropolitan areas saw brisk activity in new property completions and absorptions, accounting for 10 percent of total U.S. activity in 2005.9
Credit quality remains favorable as Texas-based insured institutions continue to report past-due rates for CRE and construction and development loans that are at or near 10 year lows.
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