Economic uncertainty due to COVID-19 threatens to push commercial borrowing into a freefall
The coronavirus pandemic has dampened what should have been a strong first quarter for the commercial real estate markets, according to the Mortgage Bankers Association's latest survey.
MBA's quarterly survey showed that annual commercial and multifamily loan originations dipped 2% year over year. Originations were also 40% lower than Q4 2019.
"Commercial real estate finance markets were active during the first quarter – the start of what was expected to be another strong year of borrowing and lending," said Jamie Woodwell, vice president of commercial real estate research at MBA. "That strong start has been derailed by the coronavirus and our individual and collective responses to it. Early indications are that low-interest rates continue to attract some property refinancing, but that overall transaction activity has fallen, given the economic uncertainty stemming from the virus. Property investors and lenders have now turned more of their attention to their existing portfolios instead of new business opportunities."
Originations for hotel, industrial, and retail properties saw the largest year-over-year decline in commercial/multifamily lending volumes. By property type, hotels were down 42%, while industrial and retail dropped 39% and 37%, respectively. On the other hand, office properties rose by 8%, multifamily up by 15%, and healthcare properties increased 16% annually.
Among investor types, the dollar volume of loans originated for life insurance companies was 18% lower than last year's level. Commercial bank portfolios also edged down 1%, while loans originated for government-sponsored enterprises grew 6%, and loans for commercial mortgage-backed securities climbed 14%.
