The COVID-19 pandemic’s nearly year-long drag on the commercial real estate industry will likely lead to 2020 closing out the year with a large drop in loans issued by commercial and multifamily mortgage bankers, the Mortgage Bankers Association reported this morning.
Commercial and multifamily mortgage bankers are expected to close $395 billion of loans backed by income-producing properties in 2020, a 34 percent decline from 2019’s record volume of $601 billion, the MBA predicted in its latest forecast.
Total multifamily lending alone, which includes some loans made by small and midsize banks not captured in the overall total, is forecast to fall 21 percent to $288 billion in 2020 from last year’s record total of $364 billion. MBA anticipates a slight increase in lending volumes in 2021, with activity rising to $407 billion in commercial/multifamily mortgage bankers originations and $305 billion in total multifamily lending.
“There remains a great deal of uncertainty about the pandemic and its impacts on the economy and commercial real estate, with significant differences across property types and capital sources,” MBA Vice President for Commercial Real Estate Research Jamie Woodwell said in a statement. “The downturn is putting downward pressure on some property incomes, particularly property types most impacted by the pandemic or with shorter lease terms. With low interest rates and investment yields, property values are likely to hold up better, which should help put a floor under sales and originations volumes this year and next.”
Commercial and multifamily mortgage loan originations nationwide were 47 percent lower in the third quarter compared to a year ago, the MBA reported on Tuesday, with all property types showing a year-over-year decline in lending volumes.The third quarter saw a 94 percent year-over-year decrease in the dollar volume of loans for hotel properties, an 83 percent decrease for retail properties, a 58 percent decrease for office properties, a 51 percent decline for health care properties, a 31 percent decrease in multifamily properties, and a 23 percent decrease for industrial property loan originations.
Across the first three quarters of 2020, multifamily originations are down 17 percent, the MBA said.
“The strong level of refinance activity of multifamily mortgages, particularly into Fannie Mae, Freddie Mac and FHA loans, is lifting overall originations activity from where it might otherwise be, and is driving differences between property types and capital sources. These contrasts are likely to remain pronounced,” Woodwell said.
If there is a bright side, the predicted drop is smaller than the 60 percent drop in commercial and multifamily lending which the MBA predicted in June.
