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An index of commercial lending activity declined 52 percent in the past year as financial institutions tightened their underwriting standards, according to an industry report.

The CBRE Lending Momentum Index, which tracks CBRE-originated commercial loan closings in the U.S., declined by 5.4 percent from the first quarter and 52 percent from the previous year.

“Borrowers who have to transact in the current environment are turning to shorter-term fixed loans until stability returns,” CBRE President of Debt & Structured Finance President Rachel Vinson said in a statement. “Costlier credit with tighter terms continues to encourage many to sit on the sidelines.”

Banks accounted for the largest share of non-agency loan closings for the fifth consecutive quarter at 43.4 percent, up from 41 percent in the first quarter. Small regional and local banks are the most active, and 25 percent of bank loans were used to fund construction projects, including a majority in the industrial sector, CBRE reported.

Other major non-agency sources of loans included life insurance companies (27 percent) and alternative lenders such as debt funds and mortgage REIT’s (26 percent).

Government agencies’ multifamily lending declined to $27.8 billion, down from $33.4 billion the previous year. And collateralized loan obligations dropped from $24 billion in the first half of 2022 to $2.1 billion in the first six months of 2023.

“Despite ample available debt, commercial lending has been hampered by choppy markets,” Vinson said in a statement.