Commercial real estate financing in Chicago dropped 13% in the first six months of 2017, CrediFi found in a recent report on Chicago lending.
Windy City loan originations for commercial properties slumped from $12 billion in the first half of 2016 to $11 billion in the first half of this year.
It’s a trend that’s not unique to Chicago.
Commercial real estate financing also has been down in New York City, where originations declined 17% from 2015 to 2016. Though loan origination remained flat in the first half of this year, it likely would have fallen in Q2 had it not been for several unusually large deals.
But as we all know, even in a down market there are winners. CrediFi analyzed Chicago lending and identified the top loan originators despite the lackluster overall performance.
Wintrust Financial Corp., a financial holding company based in Rosemont, Illinois, came in at the top of CrediFi’s list of leading Windy City originators in Q2. Wintrust Financial Corp., the parent company of Wintrust Bank and several other subsidiaries, originated almost $300 million in loans for over 60 Chicago-area properties during the quarter. This was an 87% increase over the holding company’s relatively low activity in Q1, but Wintrust’s Chicago CRE origination in Q2 was down 12% year-over-year.
During the quarter, Wintrust’s Wheaton Bank & Trust subsidiary issued a $23.5 million loan for the historic Weyland Building at 1970 N. Milwaukee, which subsequently was replaced by a loan from Principal Life Insurance in Q3.
Wintrust’s Q2 origination wasn’t enough to earn it the highest ranking among Chicago CRE originators for the first six months of the year, though it did make the top five, landing in fourth place.
National banks edged out the regional lender to take the top three spots in our year-to-date ranking for the first two quarters of the year. Goldman Sachs was Chicago’s top originator in the first half of 2017, followed by Wells Fargo, JPMorgan Chase, Wintrust and Pittsburgh-based regional lender PNC Financial Services Group.
Indeed, U.S. national banks were responsible for 41% of the CRE loan originations in Chicago that were issued by the city’s top 20 originators in the first six months of this year. Illinois banks such as Wintrust Financial Corp., Lakeside Bank and First Midwest Bank were responsible for 28% of loans issued by the top 20 originators.
Although Goldman Sachs originated few loans in the Windy City in the first six months of the year, its $1.02 billion financing of Chicago landmark Willis Tower in Q1 (with the participation of Bank of America and Citigroup) was enough to land Goldman the title of leading Chicago CRE originator in the first half of 2017.
So what will we see in the second half of 2017? On the one hand, the retail vacancy rate in Chicago is nearing a seven-year high. On the other, office vacancy rates are dropping in the central business district while office rents rise, and Chicago is classified as “undervalued” by a UBS index tracking the risk of housing bubbles in global financial centers.
If any lenders are poised to reverse the decline in loan origination we’ve seen, it looks for now like U.S. national banks and Illinois-based banks will be first in line to turn things around. We’ll have to wait a few months to see whether or not they pull that off this year.
Ely Razin is CEO of CrediFi, a big data platform serving the commercial real estate finance market, and its online marketplace, CredifX. He can be reached at firstname.lastname@example.org.