Commercial, multifamily originations stall as owners hold off on major moves

Commercial property owners "on the fence" about selling or refinancing

Commercial, multifamily originations stall as owners hold off on major moves

Commercial and multifamily mortgage loan originations fell in the first quarter as the market stagnated, according to the Mortgage Bankers Association (MBA).

Commercial/multifamily lending was essentially flat year over year. However, it was down 23% compared to the fourth quarter of 2023. MBA said uncertainty surrounding interest rates is making property owners hesitant to commit to major transactions.

“Borrowing and lending backed by commercial real estate properties remained muted in the first quarter of 2024,” said Jamie Woodwell, head of commercial real estate research at MBA. “Elevated interest rates and uncertainty about their direction have kept many current owners on the fence, with little commending a sale or refinance unless something forces the issue.”

Breakdown by property type

The first-quarter results revealed a mixed picture across different property sectors. According to MBA’s report, loan volume decreased significantly for retail properties (31%) from the same period a year ago, healthcare properties (22%), and office properties (21%). 

Multifamily properties saw a smaller decline of 7%.  Meanwhile, hotel properties showed an 8% increase, and industrial properties experienced a striking 63% surge in lending activity.

Shifts in investor activity

Lending by traditional depositories (banks) decreased by a substantial 41% year-over-year. Loans from government-sponsored enterprises (Fannie Mae and Freddie Mac) experienced a 17% decline.

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However, life insurance companies saw a boost in lending activity at 35%, followed by a 41% increase for investor-driven lenders. Commercial mortgage-backed securities (CMBS) experienced the largest surge, with a 93% increase in loan volume.

Woodwell believes the market will see more activity as upcoming loan maturities and other factors prompt owners to take action.

“Property owners, potential owners, lenders, and others are all working through the specifics of each individual property to identify the level of mortgage debt that property can support,” Woodwell said. “New loan originations should follow as this continues.”

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