Real Estate

Commercial and multifamily originations surge in Q3

Strong market expected to continue into 2020

Commercial and multifamily originations surged in the third quarter, the latest Quarterly Survey of Commercial/Multifamily Mortgage Bankers Originations from the Mortgage Bankers Association stated.

Commercial and multifamily originations rose 24% from the third quarter of 2018 and 9% from the second quarter in the third quarter this year, the survey states.

“Low interest rates are supporting strong levels of commercial and multifamily borrowing and lending,” said Jamie Woodwell, MBA vice president for commercial real estate research. “Through the third quarter, every major capital source is lending at a pace above last year’s level. Loans backed by multifamily and industrial properties, and made for life companies and Fannie Mae and Freddie Mac, are all running at a record pace.”

And what’s more, this pace is expected to continue even into 2020.

“The low interest rate environment should continue to support property values and encourage borrowing into 2020,” Woodwell added.

An increase in originations for healthcare, industrial, office and multifamily properties led the increase in third quarter lending volumes from last year, MBA data shows.

In fact, in the third quarter there was a 239% annual increase in the dollar volume of loans for healthcare properties, a 42% increase for industrial properties, a 36% increase for office properties and a 16% increase for multifamily properties.

Working against the trend, retail property loan originations fell 2% and hotel property lending decreased 20%.

Who is investing in these commercial and multifamily projects? The dollar volume originated for commercial mortgage backed securities increased by 52% from last year, commercial bank portfolio loans increased 44%, the government-sponsored enterprises increased 11% and life insurance company loans increased by 6%.

But expect that number for life insurance companies to just keep growing into 2020. Earlier this year, the MBA released a report that predicted life insurance companies are set to create a surge in multifamily lending in 2020.

This should help propel multifamily originations, which are set to hit yet another all-time high in 2020, according to the MBA.

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