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Commercial mortgage originations down, prices up

Commercial mortgage originations declined 17% from the second-quarter to the third quarter and down 7% from a year earlier, but multifamily activity remained generally strong as demand fell on most other commercial loan products, the Mortgage Bankers Association said.

The trade group noted that overall, year-to-date, commercial and multifamily loan originations rose 15% when compared to 2011 levels. But quarter-to-quarter, they fell as origination dollar volumes for retail and office properties declined 35% and 24%, respectively.

Prices remain strong as well. The Moody’s Investors Service/RCA Commercial Property Price Indices national all-property composite increased 1.4% in September. Prices have climbed 28.0% since the January 2010 trough, but remain 21.8% below the December 2007 peak.

Price wise, Boston and New York saw the biggest price gains over the last 12 months, up 10.4% and 8.0% respectively, Moody's reports. New York received a boost from Manhattan, which was up by 16.3% over the past 12 months.

The price increases came on the back of stronger originations prior to the latest MBA report. Originations performed better in the first half of the year, which may have increased demand in those core markets.

Nonetheless, all property types experienced origination drops year-over-year for the first several months of the year, except for multifamily loan originations which grew by 30%. Still, quarter-over-quarter, originations slowed across the board while multifamily property originations still grew 7% from 2Q to 3Q along with industrial property originations, which went up 8%.

"Commercial and multifamily mortgage borrowing slowed in the third quarter," said Jamie Woodwell, MBA’s vice president of commercial real estate research. "Even though low interest rates continue to make borrowing extremely attractive, a moderate pace of commercial property sales transactions and a continued drop in the volume of commercial mortgages maturing limited the overall amount of commercial mortgage loans originated."

Commercial bank portfolios increased their commercial mortgage loan volumes by 44% over last year, while loans for Fannie Mae and Freddie Mac also grew 39% in terms of originations.  

Originations for conduits tied to commercial mortgage-backed securities increased 7%, while loans originated for life insurance firms fell by 6%.

kpanchuk@housingwire.com

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