Strong investor interest in CMBS and depository loans despite earlier market slowdown
After a sluggish start to the year, borrowing and lending activity in commercial real estate gained significant momentum in the third quarter of 2024, according to the Mortgage Bankers Association (MBA).
Commercial and multifamily mortgage originations rose 59% compared to the same period in 2023 and were up 44% from the previous quarter, per MBA’s Quarterly Survey of Commercial/Multifamily Mortgage Bankers Originations.
Jamie Woodwell, MBA’s head of commercial real estate research, said that a drop in the yield on the 10-year Treasury bond, which fell from an average of 4.31% in June to 3.72% in September, played a significant role in the increased activity.
“Long-term rates have increased more recently, which could slow last quarter’s momentum,” he said.
Loans for health care properties saw an impressive 510% year-over-year increase, while hotel property loans rose by 99%, retail properties by 82%, industrial properties by 57%, and multifamily properties by 56%. In contrast, office property loan originations dropped by 3% compared to the previous year, reflecting the continuing struggles in that sector.
On a quarterly basis, health care property loans showed a significant 191% increase from Q2 2024. Retail property loans were up by 56%, multifamily by 53%, office by 42%, and industrial by 21%. The only category to see a quarterly decline was hotel properties, where loan originations dropped 25%.
Read next: Utilizing new construction loans to take your portfolio to the next level
The types of investors driving this increase in loan originations also varied. Loans for commercial mortgage-backed securities (CMBS) saw a 260% year-over-year rise, while loans from depository institutions increased by 69%, investor-driven lenders by 62%, life insurance companies by 31%, and government-sponsored enterprises (GSEs) like Fannie Mae and Freddie Mac by 28%.
Compared to Q2 2024, loans from depositories surged 86%, while GSE loans increased by 55%, life insurance company loans rose by 40%, investor-driven lenders by 21%, and CMBS by 12%.
“Each property and loan is unique and faces a different situation depending on its property type, market, submarket, vintage, business plan and more,” Woodwell said in the report. “All those factors will play a role in the volume of borrowing/lending in coming quarters.”
Stay updated with the freshest mortgage news. Get exclusive interviews, breaking news, and industry events in your inbox, and always be the first to know by subscribing to our FREE daily newsletter.
