Commercial and multifamily mortgage loan originations declined 13% year over year in the third quarter, according to the Mortgage Bankers Association’s (MBA’s) Quarterly Survey of Commercial/Multifamily Mortgage Bankers Originations.
“After a strong first half of the year, rising interest and capitalization rates began to affect deal volume during the third quarter,” said Jamie Woodwell, head of commercial real estate research at MBA. “Increasing yields across investment alternatives—including the 10-year Treasury yield more than doubling during the first nine months of the year—have shifted property financing and values, and it will take time for the market to fully absorb these changes. Volatility has been equally impactful, making the sizing of transactions extremely difficult. The result has been the first of what may be many quarters of depressed borrowing and lending activity.”
Originations for office, multifamily, and retail led to the overall year-over-year decrease for commercial and multifamily lending volumes in the third quarter. Office saw a 44% decline, while multifamily decreased 16%, retail decreased 6%; and industrial dropped 4%. Lending volumes for hotel properties saw a 24% year-over-year increase, while health care rose by 61%.
“Different capital sources have felt the slowdown in different ways—with third-quarter originations in the commercial mortgage-backed securities (CMBS) market down almost 75% from a year earlier, while originations by banks and other depositories were 25% higher,” added Woodwell. “A broad decline in transaction activity is likely to impact all capital sources, although perhaps not equally.”
In addition to CMBS decreasing 71% year over year, life insurance company portfolios declined 42%, government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac decreased 15%, and investor-driven lenders saw an 8% drop. Originations for depositories increased 25%.
Quarter over quarter, originations for commercial and multifamily also decreased 13% in the third quarter, with multifamily experiencing a 12% drop. In addition, originations for office properties decreased 31% quarter over quarter, while retail saw a 27% drop; health care properties, a 21% decline; and industrial, a 6% decrease. Hotel originations increased 45%.
Among the investor types, according to the MBA, life insurance company loans saw a 37% decrease quarter over quarter, followed by a 35% decrease for CMBS and a 22% drop for investor-driven lenders. Loans for depositories decreased 7%, while GSE originations experienced a 17% increase.
