Commercial/Multifamily Lending Came on Strong in Q4; MBA Expects Healthy 2014

The Mortgage Bankers Association (MBA) called the fourth quarter of 2013 a particularly strong one for commercial and multifamily mortgage originations, with a total volume of around $280 billion in closed loans, the highest volume since 2007.  Preliminary figures indicate that the volume for the entire year was up 15 percent from 2012 and increased 34 percent between the third and final quarter of 2013.

Despite the strong annual figures multifamily lending was essentially flat between Q4 2012 and Q4 2013 while health care, retail, and office properties drove the market; healthcare lending increased 70 percent during that period.   From Q3 to Q4 however every sector except office properties increased by double digits and multifamily originations had the strongest showing, increasing 44 percent, well above the runner-up retail sector with a 34 percent increase.   

Among investor types Fannie Mae and Freddie Mac, the government sponsored enterprises or GSEs, had a particularly poor showing when the two fourth quarters are compared.  The GSE originations, which would by definition almost entirely multifamily, were down by 43 percent year-over-year and were off 18 percent for the year-to-date.  However this sector came back strongly between the third and fourth quarter with the dollar volume of originations rising 48 percent. 

Commercial banks increased the volume of mortgages originated in the sector by 54 percent year-over-year and 44 percent quarter over quarter.  CMBS/Conduits were up 15 percent from Q4 3012 and 35 percent from the third to the fourth quarter.

MBA is predicting an even better market in 2014, expecting that commercial and multifamily mortgage originations will reach $300 billion, 7 percent more than in 2013.  Of that number MBA projects multifamily mortgage originations to reach $116,000.  By 2016 commercial/multifamily originations will rise to $333 billion.

"Early indications are that commercial and multifamily lenders increased originations by 15 percent in 2013," said Jamie Woodwell, MBA's Vice President of Commercial Real Estate Research.  "This year will once again see fewer loans coming up against their maturities.  But with still low interest rates, improving property fundamentals, a rebound in property prices, and higher loan maturity volumes on the horizon, we anticipate mortgage originations will continue to increase in 2014."

Commercial/multifamily mortgage debt outstanding is expected to continue to grow in 2014, ending the year at almost $2.6 trillion, more than three percent higher than at the end of 2013.  By the end of 2016, mortgage debt outstanding is forecasted to approach $2.7 trillion.