MBA expecting a banner year for commercial/multifamily space

by Kasi Johnston09 Jan 2020

Mortgage Bankers Association (MBA) is predicting another record-breaking year in commercial and multifamily lending as momentum coming out of 2019 is expected to continue. Bankers are expected to close a record $693 billion of loans backed by income-producing properties this year, according to the organization. That’s a nine percent increase from 2019’s anticipated volume of $628 billion.

“One of the changes we’ve seen that has a particular impact is the low interest rates and the expectation that those rates are going to be lower for longer than folks had anticipated one year ago,” said Jamie Woodwell, MBA’s VP for commercial real estate research.

On top of low interest rates, he added that strong fundamentals and solid property values are expected to translate into another growth year for commercial and multifamily lending. Another factor, according to Woodwell is the low yield environment across all investment options which will put upward pressure on prices.

“What we’ve seen in the past is higher property values tend to lead to more sales transactions, and more mortgage originations.” Also driving this activity is the fact that delinquency rates are near record lows for most capital sources, Woodwell added. 

MBA is forecasting total multifamily alone to rise nine percent to $395 million, surpassing last year’s expected record of $364 billion. 2018 was a record year for mortgage originations, borrowing and lending and Woodwell said 2019 is expected to be record-setting as well.

“With the low interest rates and strong property values in 2020, we think those will be higher still and in 2021, we’re expecting originations to remain at a high level, but maybe just pull off a bit from those 2020 levels.” The organization is predicting commercial/multifamily originations to fall slightly to $660 billion in 2021, and multifamily lending to dip to $392 billion. 

When coming up with the forecast, MBA researchers consider the fundamentals of the commercial multifamily markets as the driver. “We look at job growth driving office properties, household growth driving multifamily, e-commerce driving industrial and things like consumer spending affecting retail,” he added.

As for which property types will really push activity this year, Woodwell is expecting industrial and multifamily to continue to thrive.

“There has been some concern about retail, but I think that may be reaching a bit of an equilibrium from an investor’s perspective, but I do think we expect a bit more action than historical levels from multifamily and industrial,” he said.