Commercial and multifamily mortgage loan originations hit a record high last year at $900 billion and may not be done climbing, according to the Mortgage Bankers Association’s quarterly survey released this week.
Even while the capital markets are widely anticipating the Federal Reserve will start raising interest rates as early as next month, the MBA expects the volume in 2022 to surpass last year’s new high. Total commercial and multifamily mortgage borrowing and lending is expected to break $1 trillion for the first time in 2022, a 13% increase from 2021’s estimated volume.
“Part of the growth from 2020 was a bounce-back from the worst of the recession. However, rebounding property fundamentals and strong valuations, record sales transaction volumes, and low interest rates all fueled commercial and multifamily borrowing and lending activity that easily outpaced previous periods,” Jamie Woodwell, MBA’s vice president of commercial real estate research, said in a statement.
Commercial real estate lending volumes are closely tied to the values of the underlying properties, Woodwell said. And, in 2021, those values rose by more than 20%. Higher property values mean higher borrowing amounts.
“Those increases will fuel further demand for mortgage debt in the coming years,” he said. “Continued increases in property incomes, and stability in the ways investors value those incomes, should also support solid demand for mortgage capital, even in the face of modest increases in interest rates.”
Multifamily lending alone is forecast to rise to $493 billion in 2022 — a new record and a 5% increase that surpasses last year’s record total of $470 billion.
Further out, MBA anticipates borrowing and lending to remain high in 2023, with slightly more than $1 trillion of total commercial real estate lending and $474 billion in multifamily lending.
The surge in lending last year was widespread. By property type, originations for industrial properties increased 140% from 2020, retail properties increased 73%, hotel properties increased 71%, office properties increased 66%, healthcare properties increased 56%, and multifamily properties increased 54%.
Among lending types, loans for nonbank investment funds increased 225%, originations for mortgage-backed securities increased 167%, loans for commercial bank portfolios increased 83%, and loans for life insurance companies increased 76%.
Author Credit: CoStar